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Inflation Eases in September

Oct 19, 2018

The Conference Board of Canada’s Principal Economist Alicia Macdonald offers the following perspectives/insights:


“Today’s data releases show an easing of price pressures and a small drop in retail spending. Despite the monthly softening in these indicators, the Bank of Canada is expected to raise rates next week given that economic fundamentals remain robust.”
—Alicia Macdonald, Principal Economist, The Conference Board of Canada.


  • Growth in headline inflation continued to decelerate last month. After reaching 3.0 per cent in July and easing to 2.8 per cent in August, inflation in September cooled to a 2.2 per cent pace.
  • Lower year-over-year growth in gasoline prices helped bring inflation down last month with the transportation index growing by 3.9 per cent in September compared to 7.2 per cent in August.
  • The deceleration in transportation and recreation costs in September was partially offset by faster growth in food prices, shelter costs and clothing and footwear.
  • Within the shelter index, mortgage interest costs were up 6.4 per cent year-over-year, reflecting the impact of higher interest rates. This represents the fastest pace of growth in this component since the end of 2008, up sharply from this time last year when it posted growth of just 0.4 per cent.
  • In addition to lower overall inflation, softer price pressures were observed in the Bank of Canada’s three core measures, which each posted growth 0.1 percentage points lower than in August. Core measures averaged 2.0 per cent last month. 
  • The latest look at retail spending showed that sales declined by 0.1 per cent in August. In real terms, sales were down 0.3 per cent. 
  • On a year-over-year basis, real retail spending remained weak, coming in at 0.7 per cent. As outlined in our latest Canadian Outlook, this slowdown in not unexpected as consumer spending on interest rate sensitive durables is expected to be weak over the near term.
  • When we look past the weak headline numbers released this morning, the economy remains strong. We have a new trade agreement with the U.S. and Mexico, the economy is operating close to capacity and inflation is at target. We expect the Bank of Canada will lift interest rates when it meets next week. 

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