October 19, 2023
Canada’s inflation rate decelerated to 3.8 per cent in September, down from four per cent in August. The figure, which was reported by Statistics Canada on Tuesday, was lower than economists were expecting.
The data agency said the deceleration in the cost of living was “broad-based” and stemmed from lower prices for a variety of goods and services, including travel, durable goods and some grocery items. On a monthly basis, the cost of living actually declined in September, by 0.1 per cent. That’s the first time that’s happened since November of last year.
Gasoline prices fell by 1.3 per cent during the month, but they’re still up by 7.5 per cent in the past 12 months, which is why fuel costs were one of the biggest factors pushing up the annual rate. If gasoline is stripped out of the inflation numbers, the rate would have been 3.7 per cent. That’s down from 4.1 per cent the month before.
Grocery prices continued to increase, but at a much slower rate. Year over year, the cost of filling up a grocery basket has risen by 5.8 per cent. That’s down from more than 11 per cent this time last year, and it’s because price increases for many food items are slowing down — and actually declining for things like bacon, bananas, grapes, and some types of cheese.
“Large monthly gains in September 2022, when grocery prices increased at the fastest pace in 41 years, fell out of the 12-month movements and put downward pressure on the indexes,” Statistics Canada said.
Jay Zhao-Murray, an analyst with foreign exchange firm Monex, says that the softer inflation number will come as welcome news to the Bank of Canada, which is trying to decide whether or not more rate hikes are needed to cool the economy.
“Today’s report is perhaps the best news that the Bank of Canada has received in months,” he said, noting that everything from food to energy to goods and core inflation all declined during the month, while costs for services were flat. “The Bank of Canada will likely take confidence in today’s report and hold rates steady at five per cent at next week’s meeting.”
Zhao-Murray said he expects core inflation to continue to trend lower, as there is more and more evidence that consumers are cutting back. Spending on things like recreation and restaurants is trending lower, and they’re also less willing to spend on goods than they are on services, which is a sign that they “have cut back on discretionary spending to protect themselves.”
