LULU, BB, SU: Inflation in Canada Spikes as Gas Prices Rise Nearly 30%

Canadians are feeling the same pain as their American neighbors when it comes to high gas prices.

The latest data shows that Canada’s inflation rate rose to an annualized 2.8% in April, driven almost entirely by a surge in gasoline and energy prices across the country. Ottawa-based Statistics Canada said the Consumer Price Index (CPI) rose from an annualized 2.4% in March of this year as Canadians paid much more for gas at the pumps.

During April, energy prices in Canada rose 19.2% year-over-year, following a 3.9% increase in March. Gasoline prices at the pumps spiked 28.6% after a 5.9% gain the previous month. The rise in gas prices is being attributed to the ongoing conflict in Iran.

News of the inflation spike has Canadian equities trading lower on May 19, with leading stocks such as Lululemon Athletica (LULU), BlackBerry (BB) and Suncor Energy (SU) in the red.

Interest Rate Implications

Like other central banks around the world, the Bank of Canada targets inflation at an annualized rate of 2%. Canada’s central bank will no doubt scrutinize the latest inflation data and use it to inform its next decision on interest rates that’s scheduled for June 10 of this year.

However, apart from gas prices, there was some encouraging progress on inflation across Canada in April. Excluding the impacts of gasoline, the Consumer Price Index rose at a slower pace year-over-year in April (up 2%) compared with March (up 2.2%). Offsetting the rise in energy and gas prices were year-over-year declines in the prices of travel tours and rents.

Comparing Canadian Stocks

As one can see in the chart below, LULU, BB and SU stocks have lukewarm ratings among Wall Street analysts. Suncor Energy stocks is the most highly recommended with a current Moderate Buy rating. The other two stocks each have a consensus Hold rating.