Inflation rises to 6.3% in December in the country
After peaking at 8.1% last June, the pace of inflation is slowing ;attenuated in Canada.
In November, the grocery basket had increased by 0.4 percentage points compared to October. On an annual basis, food costs increased by 11.4% in November.
Inflation slowed in December in Canada to rise by 6.3% on an annual basis compared to the same period in December 2021, reports Statistics Canada. Good news, as inflation was 6.8% on an annual basis in November.
Excluding energy and food costs – which are the two expenditure items most affected by inflation – prices rose by 5.3% in December 2022 compared to the same period in 2021.
Although the rise in prices remains strong in the country, it nevertheless eased in December, according to analysts at Statistics Canada.
A slowdown largely attributable to a 13.1% drop in fuel prices at the pump in December compared to November, in particular due to a drop in the price of crude oil in the context of a global economic slowdown and a COVID-19 outbreak that affected China's economy.
This is the largest monthly decline pronounced since April 2020, underlines Statistics Canada. Year-over-year gasoline prices rose 3% in December after rising 13.7% in November.
In addition to gasoline, the price of fuel oil saw a 14.8% decrease month-over-month.
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Also heavily impacted by inflation, the price of groceries also saw some respite in December. Year-over-year, prices for food purchased from stores slowed slightly in December (+11%) compared to November (+11.4%), notes Statistics Canada.
This slowdown was, however, offset by higher prices for fresh vegetables, which cost 13.6% more in December after rising 11.2% in November, again on an annual basis. An acceleration in the pace of price growth was widespread for vegetables, including tomatoes (+21.9%) and other fresh vegetables (+11.7%), due to unfavorable weather conditions observed in producing regions , we learn in Le Quotidien this morning.
Year over year, grocery price growth has hovered around 11% in Canada over the past 5 months.
In addition to food, price growth for durable goods – such as household appliances – also slowed last month to an annualized 5.3% in November to 4.7% in December. This is the third straight monthly slowdown in the durable goods category.
Among the things that rose fastest in December, Statistics Canada reports increases in mortgage interest rates, the price of clothing, footwear and personal care items which rose 9.9% from year to year. The most marked increase in the price of this type of product since February 1983, underlines the federal agency.
The annual rate of inflation hit 6.3% in Canada in December, and could drop to 5% in the spring. Interview with Jimmy Jean, vice-president, strategist and chief economist at Desjardins Group.
After hitting an annual high of 8.1% last June, the CPI had essentially been flat all fall. Inflation was 6.9% in September and October before dropping to 6.8% in November and 6.3% in December. Since peaking in June, inflation has eased by 1.8 percentage points over the past seven months.
The Bank of Canada will be watching closely data released Tuesday morning. The central bank raised its policy rate seven times in 2022, bringing it to 4.25% in December. The Bank of Canada is trying to bring annual inflation back to a range of 1 to 3%.
It must announce its decision on the evolution of its key rate next week.
In December, the central bank argued that inflation is still too high and inflation expectations in the short term remain high. And the longer consumers and businesses expect inflation to stay above target, the more entrenched high inflation is likely to be, she wrote at the time, justifying her decision.
Be aware that hikes in the key interest rate – the Bank of Canada's main remedy against inflation – do not have immediate effects on the economy. It often takes months to measure the true impact.
In the survey on consumer expectations released Monday by the Bank of Canada, we also learned that the surge in inflation months and successive increases in interest rates have prompted Canadians to reduce their spending and postpone major purchases.