Statistics Canada says annual pace of inflation climbs to 2.2%

OTTAWA—The annual pace of inflation heated up in November as gasoline prices posted their first year-over-year increase since October 2018, Statistics Canada said Wednesday.

The agency said the consumer price index rose 2.2% compared with a year ago to end a three-month streak where the annual pace of inflation had held steady at 1.9%.

The increase in the pace of inflation compared with October came as energy prices in November posted their first year-over-year increase since April. Energy prices climbed 1.5% compared with a year ago compared with a decline of 2.9% in October.

Gasoline prices were up 0.9% year-over-year compared with a drop 6.7% in October.

Royal Bank senior economist Josh Nye said oil prices were down in November last year.

“The fact that wasn’t repeated this November means energy price growth is back into positive territory,” he said, noting that inflation will likely remain above 2% in the short term due to the lower gasoline prices a year ago.

However, Nye said the underlying inflation trends are appear to be firming with the average of the core measures of inflation at their strongest pace in a decade.

Excluding gasoline, which had been weighing on overall inflation in recent months, the consumer price index was up 2.3% compared with a year ago, matching the increase in October.

And, the average of Canada’s three measures for core inflation, which are considered better gauges of underlying price pressures and are closely watched by the Bank of Canada, was 2.17% compared with a revised figure of 2.10% for October.

In the statement accompanying the Bank of Canada’s decision to keep its key interest rate on hold at 1.75% earlier this month, the bank said it expected inflation to increase temporarily in the coming months due to year-over-year movements in gasoline prices.

However, the central bank said at the time that it “continues to expect inflation to track close to the 2% target over the next two years.”

CIBC senior economist Royce Mendes said the Bank of Canada won’t be too concerned with headline inflation rising above 2% for a few months, given that it’s largely the result of base effects.

“However, if the core measures accelerate further, monetary policy-makers could start to take more notice of consumer prices, something they haven’t had to do given that inflation has been so consistently around the central bank’s target recently,” Mendes wrote in a report.

The overall increase in prices of 2.2% compared with a year ago was driven by increased mortgage interest costs, passenger vehicles and auto insurance premiums. The increases were partly offset by lower prices for telephone services, Internet access and traveller accommodation.

Canadians also saw the price for meat rise 5.2% compared with a year ago, the fifth month of increases at or above 4.0%. The cost of fresh or frozen beef was up 6.2%, while ham and bacon prices rose 9.1%. Fresh or frozen pork was up 0.7%.

Regionally, prices on a year-over-year basis rose more in November in every province except British Columbia.