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Canada’s inflation moderates in September

(Oct. 19, 2012) -- The unadjusted all-items Canadian consumer price index (CPI) index edged up by 0.2 percent in September 2012 with the annual inflation rate holding at 1.2 percent, RBC Economics reported. It was the slowest pace of increase since late 2009, said Desjardins.

TORONTO — The unadjusted all-items Canadian consumer price index (CPI) index edged up by 0.2 percent in September 2012 with the annual inflation rate holding at 1.2 percent, RBC Economics reported. 

On a seasonally adjusted basis, consumer prices also rose 0.2 percent. The Bank of Canada’s core measure posted a 0.2 percent gain on an unadjusted basis and was unchanged on a seasonally adjusted basis. The annual core inflation rate dropped to 1.3 percent from 1.6 percent in August, which was the slowest pace of increase since June 2011, said Dawn Desjardins, assistant chief economist for RBC Economics.

In the month of September 2012, prices for gasoline, clothing, and tuition fees increased relative to August. The 3.7 percent rise in tuition fees was slightly lower than the 4.2 percent increase last September. Partially offsetting these increases were lower prices for fresh vegetables and fruit, traveler accommodation, and mortgage interest costs. Clothing and footwear prices posted the largest monthly increase by rising 4.2 percent; however, this followed a mild increase in August and three consecutive months of hefty declines in previous months. 

Relative to a year ago, clothing and footwear prices were 1.8 percent lower. Transportation costs rose 0.6 percent in the month although were only 1.6 percent higher than in September 2011. Gasoline prices posted a 2.1 percent gain in the month to be 4.7 percent higher than a year earlier. Food prices fell by 1.1 percent in September, were led by falling prices for fresh vegetables and fruit, and meat, and they were 1.6 percent higher than a year earlier.

The core measure, which excludes the prices of the eight most volatile components of the CPI, was 1.3 percent higher than September 2011. Part of the deceleration in the core price measure reflected the sharp slowing in auto price increases and the decline in clothing prices relative to a year earlier, said Desjardins.

“Canada’s inflation rate averaged a mild 1.2 percent in the third quarter of 2012, which was the slowest pace of increase since late 2009,” said Desjardins. “The Bank of Canada’s measure of the core inflation rate also slowed to 1.5 percent from the 2.1 percent average recorded in the first half of the year. The drop in the core rate was more aggressive than the Bank forecast in its July 2012 Monetary Policy Report. 

“Against this benign inflation backdrop and with the economy growing at rates that are slightly shy of its potential, there is little pressure for the Bank of Canada to adjust the amount of policy stimulus in the near term,” she explained. “Also weighing into the Bank’s assessment of the level of policy support that is consistent with achieving the 2 percent inflation target in the medium term is the high level of uncertainty about the global economic outlook. 

“This was the crux of Governor Carney’s speech earlier this week in which he suggested that the uncertain global backdrop was not only weighing on demand for Canadian exports but also seeping into Canadian companies’ sales expectations and investment plans,” said Desjardins. “This statement suggests that at next week’s policy meeting, the policy rate will remain at a stimulative 1 percent, but the conditional tightening bias that has been included in the statement since April will be removed. This change will be used to signal that the Bank has shifted its policy bias to a neutral stance from the mild tightening bias that has been in place.”

SOURCE: RBC Economics press release

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About Greg Gerber

Greg Gerber is a freelance writer and podcaster who has been writing about the RV industry since 2000. He is the former editor of RV Daily Report and can be reached at greg@rvdailyreport.com.

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