Canada CPI Ascend 0.2% in October

According to the report from Statistics Canada, consumer price index (CPI) for October gained 0.2% from the previous month, in line with estimates and slightly higher than September’s 0.1% increase.

Canadian inflation increased as expected in October, though the annual increase in the core reading slipped unexpectedly, according to official data released on Friday.

Food prices posted their first decline since January 2000, down 0.7% year over year in October after rising 0.1% in September. Prices for food purchased from stores recorded their largest decline since July 1992, down 2.1% in the 12 months to October, after decreasing 0.9% the previous month.

Prices were up in six of the eight major components in the 12 months to October, with the transportation and shelter indexes contributing the most to the year-over-year rise in the CPI. This increase in the CPI was moderated by a decline in the food index.

The transportation index rose 3.0% in the 12 months to October, following a 2.3% gain in September. This acceleration was mainly attributable to gasoline prices, which posted a 2.5% year-over-year increase in October, after declining 3.2% in September. The purchase of passenger vehicles index rose less year over year in October (+4.4%) than in September (+5.8%), but remained the top upward contributor to the 12-month change in the transportation index.

The shelter index posted its largest increase since January 2015, rising 1.9% in the 12 months to October, after a 1.7% gain in September. The homeowners’ replacement cost index was up 4.1% on a year-over-year basis in October, following a 3.9% increase the previous month. Property taxes rose 2.8% in the 12 months to October. At the same time, the natural gas index was down 3.4% on a year-over-year basis in October, after declining 11.1% in September.

Prices of fresh fruit (-7.4%), meat (-1.7%), dairy products (-2.4%) and fresh vegetables (-3.6%) declined in the 12 months to October. While prices for fish, seafood and other marine products rose year over year in October, the increase was smaller than the one recorded in September. The sugar and confectionary index (+3.1%) was one of the largest upward contributors to the 12-month change in consumer prices of food purchased in stores.

Jimmy Jean, economist at Desjardins Capital Markets in Montreal, said the CPI data came in on the soft side. “This is indicative of an economy that’s still sluggish and with excess slack,” he said.

The Bank of Canada, which sets rate policy to hit and maintain 2% inflation, kept its policy rate unchanged at 0.5% last month although officials “actively discussed” providing further monetary stimulus. It said the amount of spare capacity, or slack, in the economy would put downward pressure on price increases and keep headline CPI close to 2% through 2017 and 2018.