The annual pace of inflation slowed considerably last month to 1.7% as upward pressure from higher gasoline prices eased off, Statistics Canada said in a report Wednesday.
The agency’s latest inflation number was the weakest year-over-year increase since January 2018—and far cooler than October’s reading of 2.4%. Inflation for September was 2.2%.
Economists had expected an increase of 1.8%, according to Thomson Reuters Eikon.
Pump prices contracted 5.4% compared with a year ago because of a drop in global oil prices to register gasoline’s first year-over-year decrease since June 2017. As a result, price growth decelerated in all provinces.
Excluding gasoline, the inflation rate would have increased 1.9% in November.
Prices for durable goods last month recoiled 0.1% last month, following a 0.9% expansion in October, as consumers paid less for furniture, tools and other household equipment compared with a year earlier, the agency said.
Downward pressure on prices last month also came from lower year-over-year costs for traveller accommodation, digital computing equipment and devices and telephone services.
The main upward forces on inflation were higher costs for fresh vegetables, airline tickets and mortgage interest, the agency said.
The average of the agency’s three core inflation readings, which leave out more-volatile items like gas prices, slowed to 1.9% last month from 2% in October.
All three core readings now sit at 1.9%—below the ideal 2% target of the Bank of Canada. The core average has stayed close to the 2% bull’s eye in recent months, and November’s reading is the first time it slowed to 1.9% since June.
The central bank pays close attention to core inflation ahead of its interest-rate decisions—and the weaker reading Wednesday will likely add to the argument that governor Stephen Poloz should leave his benchmark rate unchanged at its next policy meeting on Jan. 9.
“Bad news for Alberta has been good news for Canadian consumers, as cheaper gasoline has brought inflation down to earth,” CIBC chief economist Avery Shenfeld wrote in a note to clients.
“Core prices are still only a hair below the midpoint of the Bank of Canada’s target, so where interest rates go from here will be more guided by growth ahead.”
The central bank, which has been on a clear rate-hiking path, can raise its trend-setting rate as a way to keep inflation from climbing too high. It has increased the rate five times since the summer of 2017 in response to Canada’s strong economic performance.
As he weighs his next decision, experts expect Poloz to remain focused on the recent plunge in oil prices, the capacity of the energy sector to engage in business investment and the ability of Canadian households—many of which are saddled with very high levels of debt—to manage higher interest rates.
The bank must also consider another concern: a sharp deceleration in wage growth over the past six months. The national unemployment rate has been near a 40-year low for more than a year, but wage growth has cooled instead of picking up its pace in the tightened labour market.