The Consumer Price Index (CPI) rose 2.0% on a year-over-year basis in October, up from a 1.6% increase in September, as gasoline prices fell to a lesser extent in October (-4.0%) compared with September (-10.7%). The all-items CPI excluding gasoline rose 2.2% in October, the same growth rate as in August and September, reported Statistics Canada on Tuesday.
Prices for goods rose 0.1% on a year-over-year basis in October, following a 1.0% decline in September. In contrast, prices for services decelerated in October, rising 3.6%, the smallest yearly increase since January 2022. Over the past three years, prices for goods rose 10.2%, while prices for services increased 14.2%, it said.
On a monthly basis, the CPI rose 0.4% in October following a 0.4% decline in September. On a seasonally adjusted monthly basis, the CPI increased 0.3%, added StatsCan.
“Year over year, gasoline prices fell to a lesser extent in October (-4.0%) compared with September (-10.7%). The smaller decline is partly attributed to a base-year effect, as prices fell 6.4% month over month in October 2023, stemming from lower refining margins and weaker global oil consumption,” said the report. “On a monthly basis, prices for gasoline were up 0.7% in October, following a 7.1% decline in September.”
“Prices for food purchased from stores rose at a faster pace year over year in October (+2.7%) compared with September (+2.4%). This was the third consecutive month price growth for groceries outpaced headline inflation. Notable contributors to the acceleration were higher prices for other fresh vegetables (+7.3%) and preserved fruit and fruit preparations (+7.6%). The acceleration was moderated by downward pressure from fresh or frozen beef in October (+7.0% compared with +9.2% in September), among other food items.”
Year over year, prices for the Canadian consumer rose at a faster pace in October compared with September in all provinces.
Karen Judge, Director and Senior Economist, CIBC Capital Markets, said the pace of inflation for the Canadian consumer accelerated in October, but this follows a string of reports that showed more muted price pressures.
“The 0.4% m/m non-seasonally adjusted increase left annual inflation at the 2.0% target, with both of those figures being a tick above the consensus expectation. Higher property taxes were the main contributor to the monthly NSA change, which are updated in the index once a year with the release of the October data. Although the Bank of Canada’s key core metrics, CPI trim and median both accelerated by two ticks to 2.6% and 2.5% y/y, respectively (vs. 2.4% expected for both), some other key exclusionary measures still show very tame prices, with CPIX at 1.7% and CPI ex. shelter at 0.9% y/y. Given that this report follows a string of better news on inflation, and the fact that the GDP and employment data remain to be seen ahead of the December BoC decision, we still see a 50bp cut as possible at the next BoC meeting,” she said.
James Orlando, Director and Senior Economist at TD Economics, said the data reinforced the message that the Bank of Canda’s (BoC) goal of stabilizing inflation won’t be a smooth path.
“While the increase in headline inflation was expected, the move higher in core inflation was discouraging. Even worse, on a three-month basis, core inflation moved from just above the BoC’s target, at 2.1%, to 2.8%. That was a big move and points to core inflation remaining above the BoC’s target in the coming months. High inflation for shelter, food, and health care were behind this, and aren’t looking likely to go away any time soon,” he said.
“The BoC is likely to view today’s data release as a minor setback. Inflation had become a background worry, and while it isn’t raising any red flags yet, today’s data is a reminder that getting price growth to settle at 2% will take time. The BoC will also be getting a reading on Q3 GDP growth next week. That release will do a lot to help guide the central bank in deciding whether it will cut by 25 or 50 bps in December. We think that a 25 bp cut remains the most likely outcome, especially given the resilience that the economy has demonstrated over the last few months.”
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