Canada Inflation December 2018


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.”

In its January monetary policy report, the Bank of Canada forecast inflation averaging 1.7% in 2019 and 2.0% in 2020. Last month, FocusEconomics Consensus Forecast analysts saw inflation averaging 2.0% in 2019, which was down 0.1 percentage points from the prior month’s forecast. For 2020, our panelists saw inflation also averaging 2.0%. A new Consensus Forecast will be published on 29 January.

Author:, Economist

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Canada Inflation Chart

Canada Inflation December 2018 1

Note: Year-on-year and month-on-month variation of seasonally-adjusted consumer price index in %.
Source: Statistics Canada (SC).

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