Rate of inflation slows to 2.2% in September: StatsCan

The rate of inflation slowed in September on the back of easing gas prices—a result that could weigh on the pacing of Canada’s monetary policy.

Specifically, the consumer price index (CPI) rose 2.2% on a year-over-year basis in September, reports StatsCan, compared to a 2.8% increase in August. Consensus was for an increase of 2.7%.

Month over month, CPI decreased 0.4%, due to easing transitory pressures from the gasoline, air transportation and travel tours indexes, says StatsCan.

Though prices were up in all eight major components in the 12 months to September, the transportation index increased at a slower pace in September (+3.9%) than in August (+7.2%). Still, it remained the largest contributor to the year-over-year increase in CPI, says StatsCan.

In emailed commentary, CIBC senior economist Andrew Grantham notes September’s drop-off in airline fares.

“Those prices had spiked strangely at the start of the summer, in part thanks to a change of methodology,” he says. As such, “the pullback isn’t a sign of anything worrisome within the Canadian economy,” he says.

After next week’s expected rate hike by the Bank of Canada, expectations for follow-up hikes will be pared back, he adds.

A decline in retail sales offers support for that view. In a separate report, StatsCan says retail sales for August declined 0.1%, following a 0.2% increase in July.

Weakness was broad, with sales down in seven of 11 subsectors for the month. Lower sales at gas stations more than offset gains at motor vehicle and parts dealers, says StatsCan.

In volume terms, retail sales decreased 0.3%.

In emailed commentary, CIBC director and senior economist Royce Mendes says retail sales data will “raise red flags for those who believed the central bank could accelerate the pace of monetary tightening.”

Staff

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