In a welcomed relief for Canadian consumers, the country's inflation rate showed signs of easing as the consumer price index rose by 3.1 per cent in the year up to October. This figure, while a decrease from the 3.8 per cent reported the previous month, aligns with economists' expectations.
Statistics Canada's report on Tuesday identified the primary factor behind this deceleration in the cost of living: a significant drop in the cost of gasoline. Gasoline prices witnessed a 6.4 per cent decline in October alone, contributing to a 7.8 per cent decrease compared to prices a year ago. If gasoline is excluded from the calculations, the inflation rate for October would have been 3.6 per cent, slightly lower than the 3.7 per cent reported in the previous month.
While the decrease in gasoline prices brought relief to consumers, other components of the cost of living continue to rise. Food prices increased at a pace of 5.4 per cent over the past year, a slight decrease from the 5.8 per cent annual pace in September. However, grocery prices have decelerated for four consecutive months, providing a modicum of relief for consumers.
Despite this, the impact on consumers might be less perceptible than the statistics suggest. TD Bank economist Leslie Preston notes that consumers, particularly at the checkout line, may not feel tangible relief, given that they are still paying over 20 per cent more for a basket of groceries compared to three years ago – the most significant increase in 40 years.
While staples like food and gasoline show signs of improvement, other essential aspects contributing to the cost of living are on the rise. Shelter costs, for instance, have increased by more than six per cent in the past year, twice the overall inflation rate. The primary driver of this increase is the soaring cost of rent, rising at its fastest pace in years, up by 8.4 per cent in the past year.
Owning property does not provide respite either, as mortgage interest costs surged by more than 30 per cent in the past year. Property taxes also increased by 4.9 per cent, marking the largest one-year increase on record dating back to 1992.
Economist Tu Nguyen from consultancy RSM Canada Inc. emphasizes that these rising shelter costs are consuming a larger portion of household budgets, leaving less money for discretionary spending. This situation prompts households facing higher mortgage payments to cut back on non-essential expenditures.
Nguyen suggests that these inflationary pressures, particularly in the housing sector, provide ample justification for the Bank of Canada to refrain from further rate hikes. She argues that the Consumer Price Index (CPI) report reflects a cooling economy, giving the central bank room to maintain the policy rate unchanged at the December announcement and allowing monetary policy to work its way through the economy.
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