Inflation rate falls slightly in November even as grocery, shelter costs rise rapidly

OTTAWA –

The nation’s annual inflation price edged down barely in November, however that is little aid for Canadians as grocery and shelter prices stay stubbornly excessive.

In its newest client worth index report launched Wednesday, Statistics Canada mentioned inflation had slowed to six.8 per cent final month as costs for gasoline and furnishings cooled.

Those declines, nonetheless, have been offset by grocery costs climbing at a quicker annual price in November in contrast with the month earlier than.

The federal company mentioned meals costs rose 11.4 per cent yearly, up from 11 per cent in October.

“There was some progress being made to slowing inflation down, but not as much as I think anyone would have liked to have seen,” mentioned Royce Mendes, head of macro technique at Desjardins Capital Markets.

The rise in shelter prices was additionally a contributing think about driving up November’s annual inflation price.

Canadians are going through larger mortgage curiosity prices and rising hire. Mortgage curiosity prices have been 14.5 per cent larger in November on an annual foundation, whereas hire was up 5.9 per cent.

Statistics Canada famous that upward stress is being positioned on hire costs as extra Canadians are priced out of house possession due to excessive rates of interest.

According to latest knowledge from Rentals.ca and Urbanation — an actual property analysis agency — common hire throughout the nation is up 12 per cent from final yr, reaching a record-high of $2,024 for all rental sorts.

“Canadians have been feeling higher, rising rent costs for some time,” Mendes mentioned.

Core inflation, which excludes vitality and meals costs, can be stubbornly excessive, rising 5.4 per cent on a yearly foundation.

In a consumer notice, BMO chief economist Douglas Porter mentioned core inflation edging up is a transparent signal of persistent underlying inflation pressures.

“Turning the temperature down on inflation is proving to be an achingly slow process, and we suspect this may be a theme for 2023,” Porter mentioned.

November’s client worth index report compares with an annual inflation price of 6.9 per cent in October and September. Inflation peaked in July at 8.1 per cent and has slowed since then.

The Bank of Canada has raised rates of interest quickly this yr to chill decades-high inflation and gradual spending within the financial system.

Economists anticipate Canadians going through larger shelter prices due to excessive rates of interest to tug again on different spending. That course of is predicted to gradual inflation.

Royce mentioned Canadians have solely seen the “tip of the iceberg” in the case of the impact of price hikes on the financial system and inflation.

“The deceleration in inflation has really come as a result of supply chain disruptions easing and energy prices falling, not as a result of the Bank of Canada’s interest rate increases,” he mentioned.

Economists say it will possibly take between 12 and 18 months for price hikes to take full impact on the financial system.

Earlier this month, the central financial institution raised its key rate of interest for the seventh consecutive time this yr, bringing it to 4.25 per cent — the best it has been since January 2008.

It additionally signalled it is open to urgent pause on the speed hikes, relying on how the financial system evolves.

However, Porter is uncertain the Bank of Canada is able to cease its aggressive price hike cycle and expects it to hike charges once more in January.

“This firm report does nothing to doubt that call,” he wrote.

Porter mentioned the central financial institution could even hike charges previous January.

“And that’s something nobody is talking about.”

The Bank of Canada will make its subsequent rate of interest determination on Jan. 25.

The central financial institution could have up to date financial knowledge to contemplate subsequent month earlier than making the choice, Royce mentioned, together with fourth quarter surveys on business and client expectations on inflation.

“The data will really dictate what the Bank of Canada does, because I think it’s a very close call at this point.”

Here’s an inventory of November inflation charges for Canadian provinces

— Newfoundland and Labrador: 6.7 per cent (6.5)

— Prince Edward Island: 9.7 per cent (8.7)

— Nova Scotia: 8.6 per cent (7.7)

— New Brunswick: 7.8 per cent (6.9)

— Quebec: 6.8 per cent (6.4)

— Ontario: 6.4 per cent (6.5)

— Manitoba: 8.5 per cent (8.4)

— Saskatchewan: 6.9 per cent (8.0)

— Alberta: 6.6 per cent (6.8)

— British Columbia: 7.2 per cent (7.8)

This report by The Canadian Press was first printed Dec. 21, 2022.