Consumer prices in Canada maintained a steady pace of growth last month, as households grappled with increased costs for mortgage interest, food, and rent. According to Statistics Canada, the consumer price index rose by 3.1% in November compared to the same period last year, remaining unchanged from the previous month.
Inflation in Canada is currently just outside the Bank of Canada's target range of 1% to 3%, but it has significantly cooled down since reaching its peak of 8.1% in the summer. The central bank has been cautious about market expectations of potential interest rate cuts in the new year and has emphasized the need for sustained evidence of inflation moving toward the midpoint of the target range at 2%.
Among the main drivers of annual inflation are mortgage interest costs, rent, and food prices, although the rate of increase in grocery store prices has been slowing. Additionally, November witnessed elevated prices for services, particularly travel tours to events held in various cities across the United States.
Prices saw a marginal increase of 0.1% compared to the previous month, falling short of economists' projected decrease of 0.1%.
When excluding volatile food and energy components, core prices rose by 0.2% from the previous month, marking a slight uptick from October's 3.4% gain with a 3.5% increase compared to the same time last year.
The Bank of Canada anticipates that 2024 will be a transitional year for the economy due to the impact of past interest rate hikes, which had raised the policy rate to a 22-year high of 5%. These increases continue to constrain spending and dampen economic growth. Governor Tiff Macklem recently stated that inflation may experience some push and pull as a cooling economy suppresses price pressures while other factors buoy prices.
Overall, consumer prices in Canada are steadily rising, with certain sectors experiencing notable increases. The Bank of Canada remains cautious about potential interest rate adjustments and looks for sustained evidence of inflation moving towards its target range before making any decisions.
Inflation Holds Steady in November
The Bank of Canada continues to closely monitor two key measures of annual core inflation: the weighted median and the trimmed mean. According to Statistics Canada, both measures remained unchanged in November at an average of 3.45%. While these figures have shown some cooling in recent months, they have consistently hovered between 3% and 5% since last year, remaining well above the central bank's target.
Looking ahead, Bank of Canada policymakers are set to decide on interest rates in late January. In addition to the November data, they will also have December inflation figures and will update their economic projections accordingly. So far, data has revealed that the economy is starting to plateau, with a 1.1% contraction on an annualized basis in the third quarter of the year. Unemployment rates are also creeping up, and the housing market is facing renewed challenges after an early 2023 rebound.
November's inflation report revealed that food prices continue to rise in stores, albeit at a slower pace compared to October. Prices climbed by 4.7% year-on-year, marking the fifth consecutive month of deceleration in grocery price growth.
On the other hand, energy prices experienced a steeper decline in November, particularly due to significantly lower fuel oil prices. This drop can be partly attributed to the temporary suspension of the federal government's carbon levy.
In a bit of positive news for consumers, cellular services saw some price relief in November. Statistics Canada highlighted that customers who signed up for a cell phone plan during the month enjoyed lower prices as a result of various industry-wide promotions ahead of Black Friday sales. This included reduced pricing plans and bonus data.
As the financial landscape continues to evolve, it will be essential to closely monitor these inflation indicators and their impact on the broader economy.