Daily Commentary

MarketMinder’s View: Canada’s consumer price index (CPI) notched its slowest rise since early 2021 last month, hitting 2.7% y/y from 2.9% in March. Now, much of this article predictably views this through the lens of what it means for Bank of Canada rate cuts, which we think is a folly. More interesting to us is that this cooldown came alongside an uptick in gasoline prices, which rose 6.1% y/y (7.9% m/m)—accelerating from 4.5% as suppliers shifted toward summer blends and a federal carbon tax hike kicked in. Food was a key contributor to the slowdown, though, which is positive news and more than offsets gas’s impact. And as Statistics Canada took pains to point out in the press release, these data account for so-called shrinkflation. (The prices are quantity-adjusted, so a smaller package at the same price reflects an increase in the data.) On a core basis, the Bank of Canada’s preferred trimmed mean price gauge cooled to 2.9% y/y, the first reading under 3.0% since June 2021. The older measure of core prices that strips out fresh food and fuel—and is arguably more comparable to core prices elsewhere—fell to 1.8% y/y. So all in all, this looks like a continuation of the global disinflationary trend we have seen for many months now, occasional wiggles and interruptions notwithstanding.

MarketMinder’s View: As ever, MarketMinder favors no side nor any politician in the upcoming EU elections, weighing developments solely for potential market and economic impacts. This coverage, in our view, vastly overhypes the coming EU parliamentary elections, claiming the rise of (so-called) far-right parties in Brussels could cause massive change, even serving as a precursor to national elections. Folks, EU parliamentary elections are very often protest votes, carrying little impact at the national level. You can see that with the Greens’ poll decline, well documented herein. What really happens if fringe parties perform well? Power gets more spread out within parliament, limiting almost anyone’s ability to do anything meaningful. That is gridlock, and gridlock prevents vast legislative shifts. But overall, the European Parliament just isn’t as powerful as cast here. National governments and the European Commission wield more influence.

MarketMinder’s View: This detailed post features 16 charts that point to an array of information showing that a) inflation is slowing and should continue to, based on money supply data and b) growth, particularly in the housing sector, is slowing. While we agree with the former, and there is evidence of slowing growth in the economy like the ISM services gauge cited herein, we think this overrates housing’s impact by featuring it so heavily. Things like the small business survey and heavy industry weakness are widely known and thus unlikely to sway stocks much. The services downshift is newer, and readings are limited at this point—but it is worth watching, no doubt. The main reason we feature this piece, though, is this passage, which is super salient—and something people routinely seem to forget. “The correct way to view the interplay between growth and inflation is to first understand that high inflation is bad for growth, while low and stable inflation is conducive to growth. Economic growth by itself does not cause inflation—only monetary policy does. … Inflation creates uncertainty about the future value of the dollar, the level of interest rates, and prices. Reducing inflation thus eliminates uncertainty and promotes investment, which in turn drives growth. In short, the economy grew so much last year because inflation fell.”