Gas Price Changes Push CPI Growth Up in October

Key insights

The slight uptick in October’s CPI doesn’t necessarily signal a broad acceleration in consumer price growth. The increase in October was mostly due to fluctuations in gas prices. In October, gas prices remained lower than at the same time last year, helping to restrain broader price pressure. However, this year-over-year difference was less pronounced than in September. Excluding gasoline, the CPI grew by 2.2 per cent in October—the same rate as in September and August. Shelter costs increased by 4.8 per cent (y/y) in October, decelerating for an eighth consecutive month. However, the Bank of Canada’s preferred measures of core inflation also accelerated in October. One month doesn’t make a trend, though this increase will certainly be pored over before the Bank’s next monetary policy decision in mid-December.

The election of Donald Trump will not have a neutral effect on Canadian inflation. President-elect Trump isn’t yet in the White House, but his impending return is already roiling the Canadian economy and, indeed, much of the world. The Canadian dollar, for example, recently fell to a four-year low against the USD, making imports more expensive and putting upward pressure on Canada’s CPI. The U.S. currency may remain strong under a more protectionist administration, particularly given its enduring status as a safe asset in geopolitically turbulent times. The specific policies and the aggressiveness with which the Trump administration will pursue them are uncertain. However, trade between Canada and the United States will face new restrictions, increasing production costs that will flow through to consumer prices.