- Canadian consumer price inflation accelerated in November to 2.2% year-on-year from 1.9% in October. This was on par with the median consensus estimate.
- Seasonally adjusted, prices were up 0.1% on the month, slowing from a 0.3% gain in October
- Higher energy price inflation was the main contributor to the turn higher in headline inflation. Energy prices rose 1.5% year-on-year, up from -2.9% in October. This is largely a base effect, reflecting a steep decline in energy prices last November that has now fallen out of the year-on-year calculation.
- Other categories to see stronger inflation were clothing and footwear (2.7% from 2.3%), health and personal care (2.3% from 1.3%) and alcohol and tobacco (1.2% from 0.9%). Other categories saw slower price growth in the month relative to a year ago.
- Of the Bank of Canada’s core measures, CPI-median was again the strongest, rising to 2.4% from an upwardly revised 2.3%. CPI-trim was also higher, up to 2.2% from 2.1%, while CPI-common was unchanged at 1.9%. On average, the measures sit at 2.2%, the highest level since May 2009.
Key Implications
- Inflation heated up in November. While it was mostly an energy story, the acceleration in the CPI-median to 2.4% implies that the pick up in price growth has been relatively broad over the past year.
- That said, we do not expect to see a burst of inflationary pressures over the next year. With the economy likely still constrained by uncertainty and cautious consumers, growth is likely to come in close to potential, limiting inflation.
- The Bank of Canada has noted how close inflation is to its target in its deliberations on monetary policy. Still, it is more likely to respond to data on the real economy, especially the state of the job market, as it plots its next course of action in the New Year.
