Canada’s annual pace of inflation slows to 2.2 per cent in September

Galtero Lara
Octubre 22, 2018

September marked the eighth consecutive month that the overall inflation rate has exceeded the Bank of Canada's 2.0 per cent target.

The central bank, which aims to keep inflation within a target range of one to three per cent and adjusts its interest rate target to help achieve that goal, is expected to raise its key interest rate target, which sits at 1.5 per cent, by a quarter of a percentage point.

Statscan's data showed that gasoline prices increased by 12.0 percent over September 2017, down from the 19.9 percent year-over-year jump in August.

"As mortgages reset to higher rates, debt service costs will eat into household disposable income, weighing on credit growth and consumer spending in the years ahead and auguring for caution from the central bank", added TD Economics.

The transportation index, which includes gasoline, was up 3.9 per cent in September compared with a 7.2 per cent move in August as gasoline prices last month were up 12 per cent compared with a 19.9 per cent increase in August. CPI common, which the bank says is the best gauge of the economy's underperformance, dipped to 1.9 per cent from 2.0 per cent in August.

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"The transportation index increased at a slower pace in September (+3.9%) than in August (+7.2%), but remained the largest contributor to the year-over-year increase", the government statistics agency said in a statement.

Slower headline inflation and easing core numbers will reassure policy makers the recent spike in gasoline prices and other products like air transportation is transitory. Traveler accommodation service prices were down 6.2% last month. Adjusted for seasonal patterns, prices dropped 0.1 percent sequentially.

Motor vehicle and parts dealers experienced a gain of 0.8 per cent in August - the first time in three months - because of higher sales at new auto dealers and at automotive parts, accessories, and tire stores to a lesser extent.

For the first time in six months, clothing stores saw a decrease in sales of -1.1 per cent.

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