According to Statistics Canada, the Consumer Price Index rose 0.2% in October after seasonal adjustments. This reverses September’s 0.2% decline in consumer prices. Annual inflation for the year ending in October was 1.0%, well below the Bank of Canada’s target of 2%.
The Bank’s Core Index, which excludes volatile items like food and energy was up a seasonally adjusted 0.2% in October following an increase of of 0.1% in September. The Core Index climbed 2.1% for the years ending in October and September.
Inflation in October
Consumer Prices climbed a seasonally adjusted 0.2% in October. Inflation for the month was driven by higher food prices, up 0.5%. The indexes for shelter, transportation and health and personal care also increased in October, while the index for recreation, education and reading was the only component to post a monthly decline. The other indexes remained unchanged.
| Consumer Price Index, seasonally adjusted (Percentage Change) | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Jan-2015 | Feb-2015 | Mar-2015 | Apr-2015 | May-2015 | Jun-2015 | Jul-2015 | Aug-2015 | Sept-2015 | Oct-2015 | Nov-2015 | Dec-2015 | |
| All-items (9) | -0.2 | 0.2 | 0.3 | -0.1 | 0.4 | 0.4 | 0.2 | 0 | -0.2 | 0.2 | 0.2 | 0.1 |
| Food | 0.7 | -0.1 | 0.2 | 0.4 | 0.4 | 0.1 | 0 | 0.3 | 0.4 | 0.4 | 0.0 | 0.6 |
| Shelter | 0.1 | 0 | 0.2 | -0.2 | 0.1 | 0.2 | 0.2 | 0.1 | 0 | 0.3 | 0.1 | 0.1 |
| Household operations, furnishings and equipment | 0.1 | 0.3 | 0.3 | 0.4 | 0.2 | 0.1 | 0.2 | 0.4 | 0.1 | -0.1 | -0.6 | 0.2 |
| Clothing and footwear | 0.4 | -0.1 | 0 | -0.3 | -0.2 | 0.2 | 0.7 | 0.4 | -0.1 | 0.2 | 0.6 | -0.9 |
| Transportation | -2.3 | 0.7 | 0.6 | 0.1 | 0.6 | 1.3 | 0.4 | -0.9 | -1.4 | 0.3 | 0.8 | 0.3 |
| Health and personal care | 0.3 | 0 | -0.2 | 0.2 | 0.3 | 0 | 0.2 | -0.2 | 0.2 | 0.2 | 0.3 | -0.2 |
| Recreation, education and reading | 0.7 | 0.7 | 0.4 | -0.8 | 0.8 | 0.4 | 0 | 0.3 | 0.3 | -0.3 | -0.3 | 0.0 |
| Alcoholic beverages and tobacco products | 0.5 | 0.3 | 0.3 | 0.5 | 0.3 | 0.1 | 0.1 | 0.3 | 0.2 | 0.0 | 0.6 | -0.2 |
| All-items excluding food and energy | 0.3 | 0.1 | 0.3 | 0.1 | 0.2 | 0.2 | 0.2 | 0.1 | 0.2 | 0.0 | 0.1 | 0.1 |
| Bank of Canada's core index (11) | 0.2 | 0.1 | 0.4 | 0.1 | 0.2 | 0.3 | 0.2 | 0.2 | 0.1 | 0.2 | 0.1 | 0.1 |
| Source: Statistics Canada. Table 326-0022 - Consumer Price Index, seasonally adjusted (Percentage Change (month-to-month)) | ||||||||||||
Higher food prices were driven by a significant spike in the cost of fresh fruit, up 3.8% before seasonal adjustments. Meat was also more expensive in October versus September, climbing 1.1% over the month and led by a 2.0% increase in the price for processed meat. The index for dairy products also jumped 1.1% in October. Grocery store bills were 0.5% higher according to the index for food purchased from stores.
Shelter costs rose 0.3% in October, which was the result of the index for property taxes and other special charges posting a 3.0% spike for the month. This index has not posted any changes since October 2014. The two indexes for home maintenance and repairs grew in October with tenants’ maintenance, repairs and other expenses up 0.5% and homeowners’ maintenance and repairs up 1.1%. Both of these indexes fell 0.5% in September. The index for water, fuel and electricity, down 1.4% in October, helped curb shelter costs. The decline in this index resulted from a one-month, 7.4% fall in natural gas prices.
Before seasonal adjustments, the transportation index was 0.3% higher in October after falling 1.1% and 1.9% in August and September. The transportation index was higher despite a 2% decline in gasoline prices and 0.6% decline in public transit costs in October. The index for the purchase and leasing of passenger vehicles, up 1.9% for the month, was the main driver of the monthly rise in the transportation index.
The index for health and personal care, up 0.2% in October on a seasonally adjusted basis and flat before adjustments, reflects a large spike in the index for other health care goods, up 3.5% for the month. Soap and oral-hygiene products posted large gains as well, up 3.6 and 2.2% respectively.
The index for recreation, education and reading fell 1.3% in October before seasonal adjustments. Breaking down this number, the index for education and reading was basically unchanged, falling 0.1%. However, the index for recreation fell 1.9%, including a 4.8% drop in the cost of recreational services and a 6.8% decline in travel service costs. Most notable, was a 12.2% drop in the index for traveler accommodation, which rose significantly earlier in the year.
Annual Inflation
For the 12-months ending in October, every component of the CPI was higher except for the transportation index. The 1% annual increase in consumer prices can largely be attributed to higher food prices, up 4.1%. The index for recreation, education and reading and the index for shelter also posted strong annual inflation numbers, up 1.9% and 1.1% respectively. The transportation index fell 3.2% for the year ending in October, following a 3.5% decline for the year ending in September. The gasoline index was down 17.1% for the year ending in October.
Canada’s Core CPI grew 2.1% for the year ending in October. This indicates more healthy underlying inflation, very close to the Bank of Canada’s target inflation rate or 2%. Falling gas prices continue to keep overall annual inflation low.
Inflation by Province
For the month of October, British Columbia was the only province to post a decline in consumer prices, down 0.3%, largely due to a steep decline in the index for recreation, education and reading, down 2.7% during the month of October. This includes a 14.3% fall in the cost of travel services in the province.
Prices in Saskatchewan, Manitoba and Alberta saw the largest spikes, up 0.5%, 0.5% and 0.4% respectively. A higher transportation index, up 1.6% in Saskatchewan and Manitoba and 1.7% in Alberta drove October’s inflation in these provinces.
| Consumer Price Index (Percentage Change (month-to-month)) | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Jan-2015 | Feb-2015 | Mar-2015 | Apr-2015 | May-2015 | Jun-2015 | Jul-2015 | Aug-2015 | Sept-2015 | Oct-2015 | Nov-2015 | Dec-2015 | |
| Canada | -0.2 | 0.9 | 0.7 | -0.1 | 0.6 | 0.2 | 0.1 | 0 | -0.2 | 0.1 | -0.1 | -0.5 |
| Newfoundland and Labrador | -0.5 | 1 | 1.1 | -0.5 | 1 | 0.2 | -0.1 | 0.2 | -0.3 | 0.1 | -0.3 | -0.5 |
| Prince Edward Island | -1.1 | 1.2 | 1.2 | -0.7 | 0.6 | 0.5 | -0.1 | -0.2 | -0.5 | 0.0 | 0.2 | -0.3 |
| Nova Scotia | -0.4 | 0.9 | 1.2 | -0.1 | 0.5 | 0 | -0.1 | -0.1 | -0.4 | 0.2 | -0.5 | -0.2 |
| New Brunswick | -0.8 | 0.9 | 1 | -0.5 | 1 | 0.1 | 0.1 | -0.1 | -0.5 | 0.2 | -0.1 | -0.2 |
| Quebec | -0.2 | 1.1 | 0.6 | 0 | 0.5 | -0.1 | 0.1 | -0.1 | -0.1 | 0.1 | -0.2 | -0.4 |
| Ontario | -0.1 | 0.7 | 0.7 | -0.2 | 0.6 | 0.4 | 0.2 | -0.3 | -0.2 | 0.1 | 0.0 | -0.3 |
| Manitoba | -0.2 | 0.7 | 1.1 | -0.1 | 0.2 | 0.4 | -0.2 | 0.6 | -0.3 | 0.5 | -0.2 | -1.0 |
| Saskatchewan | -0.1 | 0.9 | 0.9 | 0 | 0.5 | 0.3 | -0.1 | 0.2 | -0.5 | 0.5 | 0.0 | -0.8 |
| Alberta | -0.4 | 0.8 | 0.8 | 0.1 | 0.4 | 0.7 | 0.1 | 0.3 | -0.3 | 0.4 | -0.3 | -0.9 |
| British Columbia | -0.1 | 0.8 | 0.8 | -0.2 | 0.8 | 0.1 | 0.1 | 0.2 | 0 | -0.3 | 0.2 | -0.3 |
| Whitehorse, Yukon [6001009] (13) | -1.1 | 0.2 | 0.7 | 0.4 | 0.7 | 0.6 | 0.2 | 0.5 | -0.3 | -0.9 | -0.4 | 1.0 |
| Yellowknife, Northwest Territories [6106023] (13) | -0.5 | 0.2 | 0.8 | 0.3 | 0.6 | 0.6 | -0.1 | 0.2 | -0.3 | 0.3 | -0.5 | -0.3 |
| Iqaluit, Nunavut | 0.3 | 0.6 | 0.2 | 0.8 | 0.3 | 0.5 | 0.2 | 0.1 | 0.3 | -0.5 | -0.1 | -0.2 |
| Source: Statistics Canada. Table 326-0020 - Consumer Price Index (Percentage Change (month-to-month)) |
Outlook
Earlier this week, Canada’s new Finance Minister, Bill Moreau lowered expectations for the country’s economic growth due to falling commodity prices. Lower oil prices, in particular, have drastically reduced business investment. Growth in the non-resource sectors is increasingly critical. Moreau expects GDP growth of 1.2% this year and 2% in 2016.
The Bank of Canada’s Autumn Review asks the question: ‘is slower growth the new normal in advanced economies?’
“Overall, there is increasing evidence that growth in advanced economies may remain slow in the immediate future compared with its pre-crisis average, as a result of a combination of cyclical and structural factors…[however,] monetary policy-makers still have ample room to manoeuvre [and] should be able to support both potential growth and aggregate demand.”
In a recent press release, the Bank of Canada announced plans to consider alternative stimulatory monetary policy such as quantitative easing and negative interest rates. These tools will be considered when the bank revisits their target interest rate next year.
Emily is a Canadian financial blogger with multiple degrees in economics and extensive professional experience as a financial analyst. She was formerly a Ph.D. candidate at the University of Guelph's School of Agricultural Economics. Before that, she received an MA from the University of San Francisco in International Development Economics. She also has a BA in Math with a minor in Economics.
