annual rate of inflation Canada cooled off in November by 6.8 per cent amid falling prices at the gas station, but statistics canada The latest reports suggest that there is some respite for consumers at the grocery store.
In its latest Consumer Price Index (CPI) report released on Wednesday, Statistics Canada said slower price increases for gasoline and furniture last month were offset by sharply rising shelter costs and extremely high grocery prices.
Grocery prices climbed at a faster annual rate in November. The federal agency said prices rose 11.4 percent annually, up from 11 percent in October.
November saw prices increase year-over-year for many grocery store staples.
The items that saw the biggest annual price increases were edible fats and oils (up 26 percent), non-alcoholic beverages (up 19.4 percent), coffee and tea (up 16.8 percent) and eggs (up 16.7 percent).
While overall meat prices rose 5.2 percent, the cost of chicken rose 9.3 percent, Statistics Canada pointed to shrinking global supplies amid the avian influenza outbreak.
The agency said food prices remain “broad-based”, which have now outpaced growth in the rest of the CPI basket for 12 consecutive months.
in Report released in mid-November While exploring the causes of food inflation, Statistics Canada pointed to the simultaneous effect of supply chain disruptions around the world and severe weather events, causing prices to rise in Canada.
Higher interest rates drive up shelter costs
The increase in shelter costs is attributed to higher mortgage interest costs and rising rents. Mortgage interest costs were up 14.5 percent year-on-year in November, while rents were up 5.9 percent.
Statistics Canada said that upward pressure is being put on rent prices as higher interest rates keep more Canadians out of home ownership.
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On a monthly basis, petrol prices registered a decline of 3.6 per cent.
Excluding food and energy, prices increased by 5.4 percent on an annual basis.
In a client note, Douglas Porter, chief economist at BMO, said the rise in core inflation is a clear sign of persistent underlying inflationary pressures.
“Turning the temperature down on inflation is proving to be a slow process, and we suspect this may be a theme for 2023,” Porter said.
The November Consumer Price Index report compares October and September with an annual inflation rate of 6.9 percent. The inflation rate had reached 8.1 per cent in July.
Economists expect Canadians facing higher shelter costs to pull back on other spending due to higher interest rates. That process is expected to slow inflation.
The Bank of Canada has raised interest rates sharply this year to try to cool decades of high inflation and slowing spending in the economy.
Earlier this month, the central bank raised its key interest rate for the seventh time in a row this year to 4.25 per cent.
It also indicated that it is open to upward pressure on rate hikes, depending on how the economy develops.
Bank of Canada Governor Tiff McCallum reiterated in a video released on Twitter on Wednesday that “it will take some time to get inflation back to the two per cent target”. Central bank policy makers expect inflation to continue declining and reach three per cent by the end of next year and two per cent by 2024.
Porter is skeptical that the Bank of Canada is ready to stop its aggressive rate hike cycle and expects to hike rates again in January.
“This firm report does nothing to cast doubt on that call,” he wrote.
With files from The Canadian Press
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