Inflation reached 1.9% in November in Canada, down slightly

Canada’s annual inflation remained stable in November, sitting slightly below the Bank of Canada’s 2% target, although economists expect some volatility in the coming months.

The consumer price index rose 1.9% year over year in November in Canada, just shy of the 2% increase seen in October.

Generally speaking, a range of 1 to 3% is very appropriate for the Bank of Canada’s missionunderlined Royce Mendes, managing director and head of macroeconomic strategy at Desjardins Capital Markets, during an interview.

With headline inflation sitting just a little below 2% and core inflation a little above 2%, there’s not much to worry about in this report.

Data released Tuesday showed that the Bank of Canada’s core inflation measures remained stable at 2.6 and 2.7 per cent.

The general slowdown in inflation comes as goods price inflation comes to a halt, while strong wage growth and rising housing costs continue to push up service prices.

Inflation has been hovering around the 2% target for several months now, paving the way for the Bank of Canada to lower interest rates.

After making a second straight half-percentage-point cut last week, Bank of Canada Governor Tiff Macklem indicated there would be more rate cuts, but the central bank would probably reduce its magnitude.

The central bank’s key interest rate now stands at 3.25%.

However, it will be difficult for policymakers to determine the underlying trend in inflation over the coming months, with December figures slowed by the holiday. TPS on certain goods and services, said Andrew Grantham, senior economist at the CIBCin a note to customers.

The federal government announced last month that it would waive the Goods and Services Tax (GST) on certain items between December 14 and February 15.

Start of widget. Skip the widget?End of widget. Return to start of widget?

Prices, a double-edged sword

Longer-term factors, including Donald Trump’s threat to add 25% tariffs on Canadian goods, could impact inflation in the coming months.

Mr. Mendes called the potential tariffs a double-edged sword for inflation.

On the one hand, they would weaken the Canadian economy and dissipate price pressures to the extent that the economy operates below its potential, he noted. On the other hand, if Canada launches retaliatory tariffs, consumer prices could increase in Canada.

Mr. Mendes pointed out that Black Friday sales helped dampen overall price growth in November.

It seems like there were a lot of Black Friday sales in the equation.

Prices for cellular services and furniture, down 6.1% and 2.1% respectively, pushed the furniture and equipment index down 0.9% in November, Statistics said Canada.

Deep discounts on clothing and shoes also brought prices down 0.8% compared to last year, according to the report. The monthly decline in children’s clothing was the largest on record for the month of November.

Discounts in effect in many stores suggest that retailers are ready to offer sales this holiday season, as consumers have approached the spending season with a little more cautionsaid Mr. Mendes.

Food prices continued to grow faster than prices overall, increasing 2.6% from last year.

Mr. Mendes said that some elements of depreciation of the Canadian dollar could manifest themselves in food prices, such as those whose components are largely imported. The Canadian dollar slipped below 70 US cents on Tuesday, continuing a decline that began in October.

It is not a major factor in general, however, he noted, saying that for overall prices, currency depreciation likely has only a marginal impact.

Housing costs increased at a slower annual rate of 4.6%.

Growth in mortgage interest costs continues to account for a significant portion of the remaining price pressures, but is expected to moderate after interest rate cuts, the economist at RBC Claire Fan in a note to clients.

Rent inflation, which accelerated to 7.7% in November, is expected to slow in the coming months, she said.

We do not expect this trend to continue as market asking rents continue to decline and point to lower average rents with some lag.

In Quebec, annual inflation increased from 1.6% in October to 1.5% in November. Growth in the consumer price index also slowed in Ontario, Manitoba, Alberta and British Columbia.

Inflation accelerated compared to October in the four Atlantic provinces, while it remained stable in Saskatchewan.

This news can be consulted in Chinese on the website of RCI (New window).