Price increases continue to slow significantly in Canada, but not in Quebec, which still has the highest inflation rate in the country in October, at 4.2%.
In most Canadian provinces, price increases were even less than 3% in October, within the Bank of Canada’s target range.
In Quebec, inflation has already been higher than the Canadian average for several months. The tighter job market and higher salary increases than in other provinces are part of the explanation, according to Florence Jean-Jacobs, Desjardins economist.
There are others. The national daycare program has lowered the price of childcare and contributed to the decline in inflation elsewhere in Canada, but not in Quebec, where there are already subsidized childcare services, she specifies. Also, the price of energy, which had increased significantly in the other provinces, can explain the difference in inflation rates, explains the economist.
According to Statistics Canada, the Consumer Price Index (CPI) posted 3.1% in October in Canada, a notable slowdown from the 3.8% increase in September and which was expected by most economists .
This is the lowest inflation rate since June 2023. The CPI was pushed down by a month-over-month and year-over-year decline in gasoline prices . The price of plane tickets, down 19.4%, due to the decline in demand and the increase in the number of flights, is also one of the factors which contributed to reducing the progression of the CPI. Prices increased in 5 of 8 CPI categories and the largest increases were in housing, recreation and education, and food.
At the grocery store, price increases moderated in October for a fourth consecutive month. After being above 11% in the middle of the year, the increase in the price of food purchased at the grocery store had fallen to 5.8% in October. However, the price of oil, baked goods and canned fruit remains sharply increasing, notes Statistics Canada. The increase in the grocery basket should continue to slow by the end of the year, predicts BMO analyst Tamy Chen. She predicts that the price increase at the grocery store could be as high as 4.5%.
The price of goods is rising slightly, but the price of services is increasing at an annual rate of 4.6%, following a 3.9% jump in September. Rent prices are rising sharply, reflecting demand that exceeds the supply of housing. This is particularly true in Quebec, where the annualized increase in rents reached 9.1%. Property taxes are also up 4.9% year over year. Municipalities needed increased budgets to cover price increases and owners had to pay more fees in all provinces, explains Statistics Canada.
The detailed reading of the October CPI should encourage the Bank of Canada. The measures of fundamental inflation that the Bank of Canada monitors are going in the right direction, opines Randall Bartlett, senior director, Canadian economy, at Desjardins. The CPI-med and the CPI-tronq, in particular, are closer than ever to the target, at 2.7% and 3.2% respectively in annualized variation over three months. The increases in measures of fundamental inflation are the lowest in 32 months, notes National Bank economist Alexandra Ducharme.
Any progress on the inflation front revives hopes of an upcoming drop in interest rates. Bank of Canada leaders were divided last time on whether to raise interest rates or allow more time for the ten key rate hikes to be fully reflected in the economy. The Bank’s next decision will be known on December 6.
The moderation in the rise in prices, added to the increasingly obvious weakness of the economy, in any case rules out any possibility of a further increase in the key rate, believe most economists. A first rate cut is likely by mid-2024, reiterates Randall Bartlett, at Desjardins.
