Canada’s Overall Inflation Rate +3.4%; Core +1.5%
Canada continues to perform remarkably well on the inflation front. The still low (i.e., versus the rest of the world) 3.4% inflation rate in July is a combination of Canada’s stronger currency long-term versus the U.S. dollar and Goods and Services Tax (GST) cuts. The most recent 5.6% inflation rate in the U.S. would be a cause for considerable concern were it not for the fact that commodity prices, and especially the international price of oil, have come off their recent highs by significant amounts.

Inflation around the World
The break in the commodity price bubble will provide relief from accelerating prices around the world. How does inflation compare in other countries? Let’s start with the industrialized nations. The year-over-year increase in the general price level in the Euro area currently stands at +4.0%; in the United Kingdom, +4.4%; and in Australia, +4.5%. Only in Japan is inflation almost non-existent, at +2.3%, and this is symptomatic of the problems that have held that nation back for the past decade.

The easing in inflation will be particularly good news for the BRIC nations where year-over-year general price levels start at +6.3% in China and +6.4% in Brazil, then move up to +8.3% in India and skyrocket to +14.7% in Russia. In the strong-growth regions of Southeast Asia − Hong Kong, Singapore, South Korea, Taiwan and Thailand − current inflation rates are all about +6.0% or slightly higher. Inflation rates at these levels play havoc with interest rates. The pullback in commodity prices is good news for just about everybody, with the possible exceptions of the producers of those commodities.

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