Canadian consumer price inflation picked up to 2.4% in October (from 2.2% in September), ahead of the consensus forecast for an unchanged reading. Adjusted for seasonal patterns, prices rose 0.3% month-on-month.
The acceleration in price growth was broad based with five of eight major categories moving higher year-on-year and shelter prices remaining unchanged at 2.5%. Transportation costs were up 4.3% year-on-year, from 3.9% previously with prices for airfares, passenger vehicles and travel tours accelerating notably.
Two of three of the Bank of Canada’s core measures edged higher on the month, with CPI-median to 2.0% (from a downwardly revised 1.9%), and CPI-trim rising to 2.1% (from a downwardly revised 2.0%). CPI-common was unchanged at 2.0%
Key Implications
A bit of a surprise on the headline, but some volatility is to be expected. The acceleration is likely to be reversed in the months ahead on the back of declining oil prices.
Underneath the surface, price growth looks pretty stable and right on the Bank of Canada’s target. There is little in this report that should sway interest rate policy one way or the other.
More important for the Bank is the economic impact of falling oil prices, which in combination with a widening spread on western Canadian oil benchmarks, is likely to lead to a decline in oil production and notable loss of income in energy-producing provinces. The impact is not negligible and will slow the pace of Canadian economic growth over the next two quarters.
