| Consensus | Actual | Previous | |
|---|---|---|---|
| CPI - M/M | -0.1% | 0.1% | 0.1% |
| CPI - Y/Y | 2.9% | 3.1% | 3.1% |
| Core CPI - M/M | 0.2% | 0.5% | |
| Core CPI - Y/Y | 3.5% | 3.4% |
Highlights
Consumer prices edged up 0.1 percent in November, for a 12-month increase of 3.1 percent, both above expectations of a 0.1 percent monthly decline and a 2.9 percent year-over-year increase in an Econoday survey.
Excluding food and energy, consumer prices were up 0.2 percent on the month and 3.5 percent year-over-year, up from 3.4 percent.
Despite the higher-than-expected headline CPI number, overall inflation could still meet or be below the Bank of Canada's projection of an average 3.3 percent in the fourth quarter. In addition, the Bank of Canada's own core measures reflected further easing of inflationary pressures, with the average coming down to 3.6 percent from 3.7 percent in October. That being said, the acceleration of CPI excluding food and energy was a disappointment that reduces the odds of rate cuts soon.
Food prices were up 0.6 percent on the month and rose 5.0 percent year-over-year, and energy fell 1.9 percent and 5.7 percent, respectively.
Services prices increased 0.2 percent from October and 4.6 percent from a year earlier, and goods prices were up 0.1 percent and 1.4 percent, respectively. Five of the eight major categories increased on the month, including a 0.5 percent gain in shelter. Five categories also increased year-over-year.
Mortgage interest cost increased 1.9 percent on the month and 29.8 percent year-over-year, making it the largest upward contributor to both the monthly and 12-month CPI advance. Rent appreciated 0.4 percent from October and 7.4 percent year-over-year. Rent was the second largest upward contributor on a 12-month basis and the fourth largest to monthly inflation. Gasoline was down 3.5 percent on the month and 7.7 percent year-over-year, making it the largest downward contributor to both the monthly and year-over-year CPI.
On a seasonally adjusted basis, the headline CPI increased 0.3 percent after being flat in October, while the core index, excluding food and energy, increased at a steady pace of 0.4 percent.
Excluding food and energy, consumer prices were up 0.2 percent on the month and 3.5 percent year-over-year, up from 3.4 percent.
Despite the higher-than-expected headline CPI number, overall inflation could still meet or be below the Bank of Canada's projection of an average 3.3 percent in the fourth quarter. In addition, the Bank of Canada's own core measures reflected further easing of inflationary pressures, with the average coming down to 3.6 percent from 3.7 percent in October. That being said, the acceleration of CPI excluding food and energy was a disappointment that reduces the odds of rate cuts soon.
Food prices were up 0.6 percent on the month and rose 5.0 percent year-over-year, and energy fell 1.9 percent and 5.7 percent, respectively.
Services prices increased 0.2 percent from October and 4.6 percent from a year earlier, and goods prices were up 0.1 percent and 1.4 percent, respectively. Five of the eight major categories increased on the month, including a 0.5 percent gain in shelter. Five categories also increased year-over-year.
Mortgage interest cost increased 1.9 percent on the month and 29.8 percent year-over-year, making it the largest upward contributor to both the monthly and 12-month CPI advance. Rent appreciated 0.4 percent from October and 7.4 percent year-over-year. Rent was the second largest upward contributor on a 12-month basis and the fourth largest to monthly inflation. Gasoline was down 3.5 percent on the month and 7.7 percent year-over-year, making it the largest downward contributor to both the monthly and year-over-year CPI.
On a seasonally adjusted basis, the headline CPI increased 0.3 percent after being flat in October, while the core index, excluding food and energy, increased at a steady pace of 0.4 percent.
Market Consensus Before Announcement
After October's benign 0.1 percent increase, consumer prices in November are expected to fall 0.1 percent. The annual rate is seen falling 2 tenths to 2.9 percent.
Definition
The Consumer Price Index (CPI) is a measure of the average price level of a fixed basket of goods and services purchased by consumers. Monthly and annual changes in the CPI provide widely used measures of inflation. The policy target measure for the Bank of Canada (BoC), the annual CPI rate can be distorted by swings in the more volatile subsectors so the central bank also monitors an adjusted measure of the CPI that excludes a range of volatile categories in order to get a better handle on underlying trends.
Description
The consumer price index is the most widely followed indicator of inflation. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. In countries such as Canada, where monetary policy decisions rest on the central bank's inflation target, the rate of inflation directly affects all interest rates charged to business and the consumer.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets - and your investments.
Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.
As the most important indicator of inflation the CPI is closely followed by the Bank of Canada. The Bank of Canada has an inflation target range of 1 percent to 3 percent but focuses on the 2 percent midpoint. It uses the CPI and three measures of the underlying rate as the prime inflation indicators. Markets also look at core rate which excludes food and energy.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets - and your investments.
Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.
As the most important indicator of inflation the CPI is closely followed by the Bank of Canada. The Bank of Canada has an inflation target range of 1 percent to 3 percent but focuses on the 2 percent midpoint. It uses the CPI and three measures of the underlying rate as the prime inflation indicators. Markets also look at core rate which excludes food and energy.
