The recent cut in the Bank of Canada benchmark interest rate by 25 basis points is the first concrete evidence that monetary policy is seeing an easing of inflationary pressures, even as the aftermarket continues to see year-over-year pricing gains.

The rate cut, on June 5 to 4.75%, is the first since the beginning of the pandemic in 2020, and any impact is yet to be reflected in the most recent April data from Statistics Canada.

Overall, Statistics Canada reports the Consumer Price Index rose 2.7% on a year-over-year basis in April, down from a 2.9% gain in March. Broad-based deceleration in the headline was led by food prices, services and durable goods.

The deceleration in CPI the was moderated by gasoline prices, which rose at a faster pace in April (+6.1%) than in March (+4.5%). Excluding gasoline, the all-items CPI slowed to a 2.5% year-over-year increase, down from a 2.8% gain in March.

On a monthly basis, the CPI rose 0.5% in April, mainly driven by prices for gasoline. On a seasonally adjusted monthly basis, the CPI rose 0.2% in April.

Concurrent with the rate cut announcement, DesRosiers Automotive Consultants released an analysis of consumer price index data from key parts of the automotive industry, also reflecting year-over-year data as of April.

Here is their analysis:

— For April 2024 the picture continued to be one of increases, albeit with one glaring exception.

— Leading the gains was insurance premiums, the CPI for which increased 6.8% compared to April 2023.

— Gasoline, not far off, saw a 6.1% increase. (According to StatsCan, faster growth was driven by a 7.9% month-over-month increase in April. Higher costs associated with switching to summer blends, higher oil prices due to supply concerns and an increase in the federal carbon levy all contributed to the increase in prices. Also, in April, Alberta reinstated its 13 cent per litre tax that it had paused January 1.)

— In the critical maintenance category, prices increased 4.2% with parts also up 2.9%, showing an automotive aftermarket that continues to see price gains.

— The picture does change when looking at vehicle prices, however, with the CPI for the purchase of new passenger vehicles up a modest 1.4% compared to April 2023.

— Used passenger vehicles, which had experienced sharp price growth during the semiconductor-related shortages, saw CPI decline 2.3% as of April 2024.

“While consumers have seen some easing in the price growth for vehicles themselves, the costs in the aftermarket as well as gas and insurance continued to climb,” commented Andrew King, Managing Partner at DAC.

“Hopefully price pressures will continue to ameliorate, and interest rates fall further, as the automotive market enters a somewhat unsteady period.”

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