A gas pump is shown at a filling station in Montreal on April 12, 2017. Statistics Canada said on Wednesday, Feb. 17, 2021 the annual pace of inflation heated up in January as gasoline prices rose for the second consecutive month. (Graham Hughes/THE CANADIAN PRESS)

Inflation dips to lowest point in 2018

The annual pace of inflation rose to 1.7 per cent in November, the slowest pace since January, and the largest one-month drop since May 2012, Statistics Canada said in a report Wednesday.

November’s readings followed a 2.4-per-cent increase in October. Inflation for September was 2.2 per cent.

November’s numbers reflecting recent declines in gasoline prices, which fell by 5.4 per cent. Excluding gasoline, inflation rose 1.9 per cent in November.

Prices for durable goods recoiled 0.1 per cent last month, following a 0.9 per cent expansion in October, as consumers paid less for furniture, tools and other household equipment as well as for traveller accommodation, digital computing equipment and devices, and telephone services compared with a year earlier, the agency said.

The main upward forces on inflation were higher costs for fresh vegetables, airline tickets and mortgage interest, the agency said.

Source: Statistics Canada

While not a great sign for Canada’s oil producing province of Alberta, the slower pace of inflation is good news for Canadian households whose pocketbooks will benefit from the drop, said Royce Mendes, director of CIBC World Markets.

However, the Bank of Canada is likely to see November’s numbers as transitory as it sets its policy on interest rates, Mendes said.

“A drop in gasoline prices won’t do much to alter the trajectory of interest rates by itself, even when it moves headline inflation by so much,” Mendes wrote in a research note to clients. “More important will be the hit to GDP from lower energy production and investment, and any offset coming from increased household spending power.”

Lower energy prices have created concern about near-term economic growth and higher interest rates and regulatory measures to-date already seem to have been effective at slowing household spending, said Nathan Janzen, senior economist at RBC.

“We continue to expect further gradual rate hikes will ultimately be necessary, but recent softer growth numbers reinforce that the next increase probably won’t come from the Bank of Canada’s January policy decision,” Janzen wrote in a research note.

With files from The Canadian Press

Categories: Economy
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