| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| CPI - M/M | 0.3% | -0.1% to 0.4% | 0.4% | -0.4% |
| CPI - Y/Y | 1.9% | 1.8% to 2.0% | 2.0% | 1.6% |
| Core CPI - M/M | 0.5% | -0.1% | ||
| Core CPI - Y/Y | 2.3% | 2.4% |
Highlights
Canada's Consumer Price Index jumped 0.4 percent in October on a monthly basis, erasing a 0.4 percent decline in September, higher than expectations for a 0.3 percent rise in the Econoday survey of forecasters.
Compared to October 2023, the CPI is up 2 percent, climbing further after a 1.6 percent gain in September, and just beating expectations for a 1.9 percent rise in the Econoday survey of forecasters.
Excluding food and energy prices, the CPI rose 0.5 percent on a monthly basis, compared to a 0.1 percent drop in September. Compared to a year ago, the core CPI is up 2.3 percent in October vs. a 2.4 percent increase in September.
The inflation data is in line with the Bank of Canada's outlook for consumer prices, with the central bank expecting inflation to remain close to its 2 percent target. This means a continuation of its plans to cut its target interest rate so long as inflation stays"close to the middle" of the 1 percent to 3 percent range.
The uptick in headline annual inflation is because of a smaller decline in prices for gasoline. Compared to a year ago, gasoline prices fell 4 percent in October compared with September's decline of 10.7 percent. Consumer prices excluding gasoline rose 2.2 percent last month, the same growth rate as in August and September. On a monthly basis, gasoline prices are up 0.7 percent in October following a 7.1 percent decline in September.
Shelter price growth continued to slow down in October, rising 4.8 percent year over year, compared with a 5 percent increase in September.
Prices for goods rose 0.1 percent from a year ago in October, following a 1 percent drop in September. Meanwhile, prices for services dropped off the pace in October, rising 3.6 percent, the smallest annual increase since January 2022.
The average of the Bank of Canada's 'Alternative measures' of annual core inflation for October is 2.4 percent.
Compared to October 2023, the CPI is up 2 percent, climbing further after a 1.6 percent gain in September, and just beating expectations for a 1.9 percent rise in the Econoday survey of forecasters.
Excluding food and energy prices, the CPI rose 0.5 percent on a monthly basis, compared to a 0.1 percent drop in September. Compared to a year ago, the core CPI is up 2.3 percent in October vs. a 2.4 percent increase in September.
The inflation data is in line with the Bank of Canada's outlook for consumer prices, with the central bank expecting inflation to remain close to its 2 percent target. This means a continuation of its plans to cut its target interest rate so long as inflation stays"close to the middle" of the 1 percent to 3 percent range.
The uptick in headline annual inflation is because of a smaller decline in prices for gasoline. Compared to a year ago, gasoline prices fell 4 percent in October compared with September's decline of 10.7 percent. Consumer prices excluding gasoline rose 2.2 percent last month, the same growth rate as in August and September. On a monthly basis, gasoline prices are up 0.7 percent in October following a 7.1 percent decline in September.
Shelter price growth continued to slow down in October, rising 4.8 percent year over year, compared with a 5 percent increase in September.
Prices for goods rose 0.1 percent from a year ago in October, following a 1 percent drop in September. Meanwhile, prices for services dropped off the pace in October, rising 3.6 percent, the smallest annual increase since January 2022.
The average of the Bank of Canada's 'Alternative measures' of annual core inflation for October is 2.4 percent.
Market Consensus Before Announcement
Canada's annual inflation reading is expected to correct higher to 1.9 percent in October from 1.6 percent in September and 2.0 percent in August. The September figure was the lowest since February 2021. On a monthly unadjusted basis, forecasters expect a 0.3 percent rebound after the 0.4 percent drop in September and 0.2 percent decline in August. Inflation readings like this are expected to keep rate cuts coming from the Bank of Canada.
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.
