Canada – In October, the consumer price index rose 0.2% month-over-month, allowing the year-on-year inflation rate to increase two ticks to 1.5%. This was in line with consensus expectations. In seasonally adjusted terms, CPI was up 0.2% as higher prices for shelter, transportation, healthcare, household ops and alcohol/tobacco have more than offset declines in clothing and food. Recreation was flat. The core CPI, which excludes eight of the most volatile items, rose 0.2% (below consensus expectations calling for a 0.3% rise), which allowed the year-on-year core inflation rate to drop one tick to 1.7%. In seasonally-adjusted terms, core CPI was flat. Inflation in October was supported by a strong gain in gasoline prices while food inflation remained weak (prices declined in 6 of the 7 previous months). As a result, food annual inflation is negative for the first time since 1999 tapered by a significant decline in global food prices. Core inflation in Canada, which includes food components as opposed to the U.S, was below consensus expectations in October. For some time, the weakness of the CAD was supporting goods inflation but this effect has definitely faded. As a result, the annual rate stands at 1.7%, the lowest since April 2014. The recent trend is even lower with the 3- month annualized rate standing at 0.3%, its lowest level in more than 5 years.
Note that next month, Statistics Canada will publish three other measures of inflation considered by the Bank of Canada more suitable for operational decisions: CPI-Trim, CPI-Median and CPI-common component. Note that all three measures were below the so-called core inflation rate in Q2, explaining in part the dovish tone of the central bank..
To read the entire report Please click on the pdf File Below