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Introduction Inflation CPI At the beginning of this year a relatively low inflation was recorded however a somewhat higher inflation rates has been posted in the last five months as energy prices climbed upwards Consumer Price Index Commentary 2004 Canadas central bank has forecasted the inflation is expected to remain stable by the end of this year and well into the year 2005 The core inflation is seen falling below 15 per cent in the first few months of the year before moving back up to 2 per cent by the end of 2005 Furthermore a 18 increase in this years CPI is low and needs to be raised because of the unexpected increase in crude oil prices The price index slightly dropped a little in June from the May high but even if it did not increase any further the year- over-year increase would be almost 10 The new forecast calls for a 22 increase in Canadas all Items CPI in 2005 with a risk for a higher inflation rate httpeconomicscucbccomeconomics In the Banks April Monetary Policy it expected core inflation to return to 20 by the end of 2005 The central bank has forecasted GDP will increase 32 in 2006 Both the goods and service producing sectors contributed to the GDP growth Manufacturing activity was increase because of strong motor vehicle and motor vehicle parts production Higher production of industrial machinery also contributed to the increase in GDP Moreover the retail activity grew by 11 The wholesaling activity was up 08 as a result of the surge in sales of cars and machinery If the CPI rises then the price of new vehicles might increase as well That might impact on the consumer purchasing power The CPI also reflects the oil shock preference for smaller economical cars which have not been selling well recently The increase in consumer price inflation was mainly due to higher energy prices An unexpected increase in inflation
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