The annual pace of inflation slowed more than expected in September dragged down by turbulence in the airfare prices and a slower rise in the price of gasoline compared with August.
Statistics Canada said Friday the consumer price index in September was up 2.2 per cent from a year ago compared with a year-over-year increase of 2.8 per cent in August.
Economists had expected the September figure to come in at 2.7 per cent, according to Thomson Reuters Eikon.
Statistics Canada said prices were up in all eight major components for the 12 months to September.
The transportation index, which includes gasoline, was up 3.9 per cent in September compared with a 7.2 per cent move in August as gasoline prices last month were up 12 per cent compared with a 19.9 per cent increase in August.
“The biggest factor in last month’s swoon was a 16.6-per-cent plunge in airfares, the largest monthly drop in 30 years, which almost precisely reversed July’s 16.3-per-cent spike—which had been the biggest monthly rise in, yes, 30 years,” said BMO chief economist Douglas Porter.
However, the transportation group remained the largest contributor to the overall year-over-year increase in the index.
Food prices were up 1.8 per cent, while shelter costs rose 2.5 per cent. Alcoholic beverages and tobacco products were up 4.4 per cent.
The inflation report comes ahead of the Bank of Canada’s rate decision next week when it will also update its forecast for the economy in its monetary policy report.
Andrew Grantham, senior economist at CIBC Capital Markets, said that while headline inflation may have missed consensus expectations by a wide mark, that won’t prevent policymakers from hiking interest rates, which sit at 1.5 per cent, by a quarter of a percentage point again next week.
The central bank, which aims to keep inflation within a target range of one to three per cent and adjusts its interest rate target to help achieve that goal, is expected to raise its key interest rate target, which sits at 1.5 per cent, by a quarter of a percentage point.
“However, the slight easing in underlying price pressures combined with signs of softening growth (as indicated by manufacturing shipments and retail sales) will prevent a follow up hike in December and encourage a very gradual path higher in rates still,” Grantham wrote in a research note to clients.
With files from The Canadian Press
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