Canada Inflation Rate

The annual inflation rate in Canada rose to 2% in October of 2024 from an over-three-year low of 1.6% in the previous month, overshooting market expectations of 1.9%. Despite the sharper-than-expected increase, the headline inflation rate remained within the Bank of Canada’s target for the third consecutive month. The increase was largely driven by waning base effects for gasoline prices. Gasoline prices fell by 4% annually from the 10.7% drop in September, driving transportation costs to swing to inflation (0.2% vs -1.5% in September). In turn, inflation slowed for shelter (4.8% vs 5%) and food (3% vs 2.8%).

The annual inflation rate in Canada fell to 1.6% in September of 2024 from 2% in the previous month, the lowest since February of 2021, and well below the market consensus of 1.9%. It was the second consecutive period that CPI inflation was under the Bank of Canada’s target of 2%, raising bets that Canada’s monetary authority is due to extend its cutting cycle. The sharp decline was attributed to lower prices for gasoline (-10.7% vs -5.1% in August) due to lower crude oil prices, which extended the deflationary momentum for transportation (-1.5% vs -0.1%). While remaining high, price growth slowed for rent (8.2% vs 8.9%), allowing inflation to ease for shelter (5% vs 5.3%). Still, inflation edged up for food (2.8% vs 2.7%) amid an increase in restaurants (3.5% vs 3.4%) and steady growth in grocery stores (2.4%). Meanwhile, the trimmed-mean core rate held at 2.4%. From the prior month, Canadian consumer prices fell by 0.4%.

The annual inflation rate in Canada decelerated for the third month to hit 2% in August 2024, the softest since February 2021, slightly below forecasts of 2.1% and reaching the central bank's target for the first time in over three years. The slowdown in headline inflation in August was partly driven by a 5.1% drop in gasoline prices, attributed to both lower current prices and base-year effects. Also, clothing and footwear prices fell for an eighth consecutive month, down 4.4% in August following a 2.7% decline in July. Meanwhile, shelter costs, which account for around 30% of the CPI basket, rose by 5.3% in August, down from 5.7% in July. Excluding gasoline, the CPI rose 2.2% in August, down from 2.5% in July. The closely watched core price measures also cooled to their lowest level in 40 months. On a monthly basis, the Canadian CPI decreased by 0.2% in August, compared to expectations for a flat reading, following a 0.4% rise in the prior month.