Consumer price inflation rose to 2.1% year-on-year in November (from 1.4% in October), a hair above expectations for 2.0%. Month-on-month seasonally-adjusted prices were up a strong 0.5%
Price gains were relatively widespread, with all major categories except health and personal care rising in the month and accelerating on a year-on-year basis.
Energy prices rebounded soundly after pulling back in October. Energy prices were up 7.6% year-on-year, led by gasoline prices (up 19.6%).
Food and beverage prices rose 0.2% month-on-month in November (seasonally adjusted) and accelerated to 1.6% year-on-year (from 1.3%).
Core price inflation accelerated nicely according to two of the Bank of Canada’s three measures: CPI-trim rose to 1.8% (from 1.5%), while CPI-median rose to 1.9% (from 1.7%). The CPI-common measure was the hold out, edging down to 1.5% from 1.6% in October.
Key Implications
Inflation suddenly doesn’t feel so soft in Canada. The broad-based gain in prices in November echoes the trends seen in the rest of the economy and suggests that the Phillip’s curve relationship between inflation and economic slack (or lack thereof) still has some explanatory power.
With economic momentum appearing to hold up into the fourth quarter (reinforced in today’s retail sales report), the case for the Bank of Canada to follow the Federal Reserve in hiking interest rates is building. Don’t be surprised if it comes sooner rather than later.
