On a monthly basis, Canada’s core CPI increased by 0.4% in October, following a 0.4% decline in September. The seasonally adjusted CPI rose 0.3% m/m.
Prices of goods and services continue to grow unevenly, with declines in some sectors such as gasoline, while increases have slowed in others such as shelter and rent. While prices remain high, there is some cooling in the pace of rise, which contributes to easing economic pressures on households.
In terms of rental prices, it recorded a 7.3% year-on-year increase in October, compared to an 8.2% increase in September.
with a clear slowdown in areas such as Nova Scotia and Manitoba. Despite this slowdown, rental prices remain high, increasing by 21.6% compared to October 2021.
The prices of food purchased from stores in Canada increased significantly during October 2024, recording a year-on-year increase of 2.7%, compared to 2.4% in September. This is the third consecutive month that grocery price growth has outpaced headline inflation.
The main factors contributing to the acceleration in prices were the increase in the costs of fresh vegetables (+7.3%), preserved fruits and fruit preparations (+7.6%). Despite this rise, the acceleration was partially offset by a decline in fresh or frozen beef prices, which rose 7.0% in October compared to 9.2% in September, along with lower prices for some other food items.
Regional price increases
Regionally, all provinces saw year-on-year price increases in October, reflecting rising inflation across much of Canada. The largest increases in food prices have been observed in provinces that have experienced significant shifts in local markets.
Canadian Core CPI: Overview
The Core Consumer Price Index (CPI) CAD m/m is an important economic indicator in Canada that measures the monthly change in the prices of a fixed basket of goods and services, excluding volatile items such as food and energy. Here is a detailed overview:
- Definition
Core CPI: The core CPI focuses on underlying trends of inflation by excluding items that can experience significant price fluctuations. This provides a clearer picture of ongoing inflationary trends.
- Monthly measurement
This term refers to the fact that data is reported on a monthly basis, comparing the price level in the current month with the level of the previous month. This helps economists and policymakers understand the dynamics of inflation in the short term.
- Account
The core CPI is calculated by taking into account price changes for different goods and services, with the exception of the most volatile food and energy categories. The remaining average prices are calculated to determine the monthly change.
- Importance
Inflation insights: The Bank of Canada (BoC) and economists are watching the core CPI closely as it helps gauge ongoing inflation trends, which are vital to monetary policy decisions.
Policy implications: A significant rise in the core consumer price index could prompt the Bank of Canada to consider tightening monetary policy.
such as increasing interest rates, to combat inflation.
- Market Reactions
Changes in the core CPI can affect market expectations regarding future interest rates and general economic conditions. A rise in the core CPI often leads to expectations of interest rate hikes.
- Release schedule
Core CPI data is usually released monthly by Statistics Canada. Market participants are watching these reports closely, as they can lead to significant market reactions, especially given their importance to inflation and economic policy.
How does the core CPI fit into the broader picture of the economic indicators it is watching?
The core CPI plays an important role in the broader landscape of economic indicators for several reasons:
- Measure inflation
Main Index: The core consumer price index is one of the basic measures of inflation, providing insights into fundamental price trends in the economy. It helps distinguish between temporary price fluctuations and persistent inflationary pressures.
- Monetary Policy Guidance
Central Bank Decisions: The core consumer price index affects monetary policy decisions made by the Bank of Canada. It helps policymakers assess whether inflation is within acceptable ranges and guide interest rate adjustments.
- Complementary indicators
- Other economic metrics: The core CPI is often analyzed in conjunction with other indicators, such as:
- Headline Consumer Price Index: Provides a broader view of inflation, including volatile items such as food and energy.
- Producer Price Index: Provides insights into wholesale price changes, which can precede retail price movements.
- Consumer confidence
Spending patterns: Changes in the core CPI can affect consumer confidence and spending behavior. When inflation is stable, consumers may feel more secure in their purchasing decisions.
- Economic growth
Impact of real GDP: Inflation measured by the core CPI can affect real GDP calculations. Persistent inflation may erode purchasing power, affecting overall economic growth.
- Market Outlook
Investor sentiment: Core CPI data can shape market expectations regarding future interest rates and economic conditions. They can influence investment decisions in the stock, bond and foreign exchange markets.
In general, the core CPI is a fundamental economic indicator that, when combined with other metrics, provides a comprehensive view of inflationary trends, consumer behavior, and economic health. Its importance extends beyond just measuring prices; it provides information for monetary policy, influences market dynamics, and helps measure overall economic stability.
