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Investing.com -- Canadian inflation slowed in October, with the Consumer Price Index rising 2.2% on a year-over-year basis, down from 2.4% in September. The monthly gain of 0.2% (0.1% seasonally adjusted) marked a softening in price pressures, though one that fell just short of market expectations.
“Canadian inflation eased in October, albeit only partly offsetting the pick up seen in the previous month,” said CIBC economist Andrew Grantham. “However, that was a little firmer than expected (consensus 2.1%), and only partly offset the prior month’s acceleration (year-over-year inflation was 1.9% in August).”
The decline was driven largely by a sharper drop in gasoline prices, which fell 9.4% from a year earlier after dropping 4.1% in September, propelled by seasonal fuel blend changes and weaker global crude prices. Excluding gasoline, CPI held steady at 2.6% on a 12-month basis, further reflecting the outsized role energy costs played in moderating headline inflation.
Food inflation eased slightly, with grocery prices rising 3.4% year-over-year compared to 4.0% the month before, though still outpacing overall inflation for a ninth straight month. Monthly grocery prices dropped 0.6%, the steepest decline since September 2020, helped by falling prices in fresh vegetables and processed foods.
Other inflation components showed renewed strength, particularly in telecom and insurance. “Prices for cellular services jumped and were up on a year-over-year basis for the first time since April 2023,” Grantham noted, as a monthly increase of 8.2% from wireless providers drove a 7.7% annual gain.
Core inflation measures showed mixed signals, with ex-food and energy prices seeing a firmer-than-expected monthly increase of 0.3% on a seasonally adjusted basis, though both the CPI-Trim and CPI-Median, which the Bank of Canada closely tracks, registered more subdued moves. Monthly gains in home insurance (+6.8%) and auto insurance (+7.3%) further reinforced that underlying pressures remain sticky.
“Overall, while inflation decelerated in October,” Grantham said, “it would take a longer period of easing price pressures, combined with indications of economic growth deteriorating again, to bring the Bank of Canada back off the sidelines.” CIBC continues to forecast no change in the overnight rate through the end of next year, as the central bank gauges whether the current trend holds.