Canada: Inflation ticks up in December
January 18, 2019
Seasonally-adjusted consumer prices increased 0.2% from a month earlier in December, contrasting November’s 0.1% fall (previously reported: -0.2% month-on-month). According to Statistics Canada, the uptick was driven by higher food and health and personal care prices.
Inflation rose to 2.0% in December from 1.7% in November, which surpassed market analysts’ expectations of 1.7% and hit the midpoint of the Central Bank’s target range of 1.0% to 3.0%. However, the uptick appeared largely driven by recent changes to the methodology behind airfare calculations, and will likely reverse in the coming months. Meanwhile, annual average inflation was unchanged in December from the previous month at 2.3%. Core inflation, which excludes volatile items including fuels and fresh produce, inched up to 1.7% from November’s 1.5%.
According to Jonas Goltermann, an economist at ING, December’s inflation reading was mostly “due to one-off factors related to the holiday season, with volatile components such as travel tours (6.6% YoY) and air transportation (21.7% MoM)”. Building on this point, Goltermann added, “Movements in these components helped to offset the decline in gasoline prices. Nonetheless, we’d expect the downward trend of headline inflation to resume in the first part of 2019 as the fall in energy prices continues to feed through.”
Author: Steven Burke, Economist