Canada’s annual inflation rate accelerated to 2.1% last month to reach its highest mark in nearly a year, Statistics Canada said Thursday.
The November inflation reading followed a 1.4% increase in consumer prices in October. Last month’s increase was driven by higher costs for gasoline and air transportation, compared with a year earlier.
November’s result means the annual pace of inflation has now surpassed the Bank of Canada’s ideal target of 2% following a two-year low of 1% in June. The central bank scrutinizes inflation data ahead of its interest-rate decisions, and it’s scheduled to make an announcement next month.
Inflation has remained below 2% for almost all of 2017 and the rate hasn’t been as high as 2.1% since last January.
The report shows that pump prices delivered a major lift to last month’s overall inflation number after rising 19.6% compared with the year before. Excluding gasoline, November’s inflation rate was 1.5%, an increase from 1.3% in October.
Two of the Bank of Canada’s three preferred measures of core inflation, designed to look through the noise of more-volatile items like gasoline, strengthened last month.
CPI-trim rose to 1.8% from 1.5% and CPI-median reached 1.9% compared to 1.7% in October, while CPI-common cooled to 1.5% from 1.6%.
By region, annual inflation was higher in every province last month with Manitoba, at 3.2%, and Saskatchewan, at 3.7%, seeing the biggest changes.
Statistics Canada also released data Thursday that showed retail sales expanded 1.5% in October, thanks to a boost in new car sales.
Retail sales were up in every province, with higher numbers in Ontario, Quebec and B.C. accounting for the bulk of the increase, the agency said.
The report showed retail e-commerce sales increased 19.4% in October, compared to a year earlier. However, it accounts for just 2.6% of overall retail sales.
CIBC Capital Markets senior economist Nick Exarhos said in a research note Thursday that the unexpectedly strong retail spending led him to revise his forecast for GDP numbers coming out Friday to 0.3%.
“Underlying inflation looks to be finally dragged higher by narrower economic slack,” he said.
“Although the common component puzzlingly decelerated to 1.5%, the other core metrics more than offset that slowdown,” said Exarhos. “On average the three new measures preferred by the BoC are tracking 1.7% vs 1.6% last month. All told, some upside beats on retail and inflation leave room for the Bank of Canada to tighten in Q1, but we’ll wait for tomorrow’s GDP figures to change our official call.”