British Columbians may have noticed a drop in the cost of consumer goods in October compared with September, as the province was the only one in Canada to see an overall decline in prices for the month.
B.C.’s Consumer Price Index (CPI) fell 0.3% in October, with some of the biggest declines being seen in the price of gasoline (down 1.3%), alcoholic beverages and tobacco products (down 1.4%) and recreation, education and reading (down 2.7%). The cost of both food and health and personal care fell 0.3%.
The cost of shelter rose in B.C. in October, led by a 0.4% increase in Vancouver. The only other product group to see price increases was clothing and footwear, up 0.2%.
Year-over-year, prices increased 1.3% in B.C., led by a 4.2% jump in the price of food. Shelter increased 0.3% in the province, driven by a 0.9% increase in this category in Vancouver.
Across Canada, the CPI grew 1.0% over the past 12 months, which was largely in line with analysts’ expectations. A 4.1% increase in the price of food, and increases in household operations, furnishings and equipment (up 2.1%) and shelter (up 1.1%) were moderated by a 3.2% decline in the price of transportation.
The drop in the transportation category was driven by a 17.1% year-over-year decline in the price of gasoline.
Nick Exarhos, economist at CIBC World Markets, said cheap gas prices are keeping CPI low for now, but this is going to change soon.
“Starting in November, we’ll be passing the anniversary date of low pump prices, and more favourable year-on-year comparisons will start feeding through the annual calculation as we head into 2016,” he said.
The biggest overall CPI increases were found in Manitoba, up 1.9%, and Saskatchewan and Alberta, both up 1.4%.
Core inflation increased 0.3% nationwide in the month and 2.1% year-over-year, still in the Bank of Canada’s target range
Dawn Desjardins, assistant chief economist at RBC Economics, said both the core and headline inflation rates will likely be around 2% beginning in early 2016, and Canada’s central bank will likely keep the overnight rate at 0.5% for another year.
“Even with inflation running around the 2% target, we expect the Bank to maintain the current level of monetary policy stimulus in order to ensure the economy grows at a strong enough pace to eliminate excess supply and reduce any downside risks to inflation holding at the target during the medium term,” she said.
The Canadian dollar dropped more than three-tenths of a cent this morning on the release of this news as well as StatsCan’s retail trade data for September, which found sales fell 0.5% in the month.
As of press time, the Canadian dollar had fallen below the 75 cent threshold and was trading at 74.93 cents U.S.
