Economists are calling for a rise in Canadian headline inflation for July but expect signs of cooling within the core inflation data for the month.

Statistics Canada is set to release its latest consumer price index (CPI) data on Tuesday. Economists tracked by Bloomberg are calling for inflation to tick up to 3.0 per cent for July annually and post a 0.3 per cent rise month-over-month. This would mark a reversal from the previous month’s decline of 2.8 per cent in inflation.

Derek Holt, Scotiabank’s vice-president and head of Capital Markets Economics,stands by the forecasts. 

“I expect goods inflation to be at the recent trend (0.1 to 0.3 per cent month-over-month) while services are expected to accelerate from June’s relative softness,” he wrote in an email to BNNBloomberg.ca on Monday.

The “easy disinflation” seen over the past number of months is behind us, Benjamin Reitzes, rates and macro strategist at BMO Capital Markets, said on Monday.  

“We’re looking for headline inflation to rise 0.4 per cent month-over-month, lifting the yearly rate three ticks to 3.1 per cent year-over-year, with risks skewed to a slightly higher print,” he wrote in a note clients.

However, Reitzes noted that he expects core inflation metrics will likely show a slowdown – a data point that will be music the Bank of Canada’s ears, he said

“Headline inflation probably rose back above three per cent in July, but core inflation should have edged lower,” Stephen Brown, senior Canada economist at Capital Economics told BNNBloomberg.ca in a phone interview on Monday.

GASOLINE PRICES

Brown explained that the dip in last month’s inflation was a bit of an outlier event as heightened gasoline prices in the summer of 2022, which peaked in June, created a large price difference when compared with June 2023’s gasoline prices.

That means that the expected rise in headline inflation for July isn’t necessarily a sign of inflation accelerating so much as a return to normal gasoline price comparisons within the CPI index, Brown explained.

In terms or core inflation – which strips out volatile items like gas and food prices – Brown is calling for a 0.1 per cent decline in July from the month prior. 

“While core inflation will still be too high for comfort, we expect a more pronounced slowdown over the rest of 2023,” he said.