Canadian annual inflation rate posts big drop, down to 2.2 pct

Lloyd Doyle
October 22, 2018

The annual pace of inflation slowed more than expected in September dragged down by turbulence in the airfare prices and a slower rise in the price of gasoline compared with August.

The 2.2 per cent figure registered "well below" the consensus forecast of 2.7 per cent, according to TD senior economists James Marple.

Growth in transportation prices eased to 3.9 per cent annually in September compared with 7.2 per cent in August.

Inflation had hit 3 percent in July - the highest in seven years - on the back of gasoline and a jump in prices for air transportation and other travel-related services.

In September prices rose in all eight main categories followed by Statistics Canada.

In early September the Bank of Canada had maintained its key policy rate at 1.5 percent, despite a 2.9 percent increase in gross domestic product in the second quarter - the largest increase since 2014.


Although Canadian inflation and retail sales data came in weaker than expected on Friday, market operators predicted the Bank of Canada still would raise interest rates again next week to keep a booming economy in check.

"The biggest factor in last month's swoon was a 16.6-per-cent plunge in airfares, the largest monthly drop in 30 years, which nearly precisely reversed July's 16.3-per-cent spike-which had been the biggest monthly rise in, yes, 30 years", said BMO chief economist Douglas Porter.

Food prices were up 1.8 per cent, while shelter costs rose 2.5 per cent.

The average of the three measures of core inflation, which look to strip out more-volatile items like gas prices and are closely scrutinized by the Bank of Canada, was 2.0 per cent in September compared with 2.1 per cent in August. Traveller accommodation service prices were down 6.2 per cent last month. Adjusted for seasonal patterns, prices dropped 0.1 percent sequentially. In volume terms, sales decreased 0.3 per cent.

Sales at gasoline stations were down 2.0 percent, while clothing and clothing accessories stores fell 1.2 percent.

Other reports by Iphone Fresh

Discuss This Article

FOLLOW OUR NEWSPAPER