Gasoline prices the biggest reason for the deceleration
Canada’s consumer price index rose by 3.1 per cent in the year up to October, down from 3.8 per cent the previous month but in line with what economists were expecting.
Statistics Canada reported Tuesday that the biggest reason for the deceleration in the cost of living was a drop in the cost of gasoline, which declined by 6.4 per cent during the month of October alone, and is down by 7.8 per cent compared to where prices were a year ago.
If gasoline is stripped out of the numbers, the inflation rate would have been 3.6 per cent in October. That’s slightly lower than the 3.7 per cent non-gasoline inflation rate clocked the month before.
Food prices increased at a 5.4 per cent pace over the past year. While that’s still higher than the overall inflation rate, it’s down from the 5.8 per cent annual pace seen in September.
Grocery prices have now decelerated for four months in a row, but as TD Bank economist Leslie Preston noted, consumers can be forgiven for not really feeling any tangible relief at the checkout line.
“Slower growth in prices may be imperceptible to consumers who are still paying more than 20 per cent more for a basket of groceries relative to three years ago — the biggest such increase in 40 years,” she said.
While the pain at the cash register for staples like food and gasoline is getting comparatively better, plenty of other aspects that contribute to the cost of living continue to increase at an eye-watering level.
Overall, shelter costs are up by more than six per cent in the past year. That’s about twice the overall inflation rate.
A big reason for that is rent which keeps going up at its fastest pace in years. The data agency says the typical cost of rent went up by 8.2 per cent in the past year. That’s up from 7.3 per cent in September.
The costs associated with owning are no better, however, with mortgage interest costs up by more than 30 per cent in the past year. And property taxes increased by 4.9 per cent in the past year. That’s up from 3.6 per cent this time last year, and it’s also the biggest one-year increase in property taxes on records dating back to 1992.
If one were to strip mortgage costs out of the numbers, the inflation rate would be 2.2 per cent and if one were to strip out shelter entirely, it would be 1.9 per cent.
Economist Tu Nguyen with consultancy RSM Canada Inc. says the shelter costs are eating a larger and larger chunk of household budgets, leaving less money for everything else and bringing down inflation in the process.
“On a per capita basis, consumer spending has actually dropped,” she said. “Households who get hit with higher mortgage payments find themselves cutting back on discretionary spending.”
She says the data give the Bank of Canada more than enough of an excuse to stop any further rate hikes.
“The CPI report is the latest sign of a cooling economy that should make the Bank of Canada feel comfortable keeping the policy rate unchanged at the December announcement. At this point, the Bank can sit back and let the forces of monetary policy work its way through the economy.