| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| CPI - M/M | -0.4% | -0.7% to 0.2% | -0.4% | 0.0% |
| CPI - Y/Y | 1.8% | 1.5% to 1.9% | 1.8% | 1.9% |
| Core CPI - M/M | -0.1% | -0.1% | ||
| Core CPI - Y/Y | 1.6% | 1.5% to 1.9% | 2.1% | 1.9% |
Highlights
Canada's Consumer Price Index is down by 0.4 percent in December on a monthly basis, after coming in flat in November, matching expectations in the Econoday survey of forecasters.
Compared to December 2023, the CPI is up 1.8 percent, slowing down a bit from the 1.9 percent pace set in November, but also in line with expectations in the Econoday survey of forecasters.
Excluding food and energy prices, the CPI fell 0.1 percent on a monthly basis, same as in November. Compared to a year ago, the core CPI is up 2.1 percent in December vs. a 1.9 percent increase in November.
The average of the Bank of Canada's 'Alternative measures' of annual core inflation for December is 2.5 percent.
The inflation data remains in line with the Bank of Canada's outlook for consumer prices, with the central bank expecting inflation to average close to its 2 percent target"over the next couple of years." This provides support for the central bank's plan to keep inflation"close to the middle" of the 1 percent to 3 percent range.
Statscan noted that the government introduced a temporary GST/HST break on certain goods on December 14, 2024. The major components impacted by the tax break were food; alcoholic beverages, tobacco products, and recreational cannabis; recreation, education, and reading; and clothing and footwear.
As a result, food purchased from restaurants (-4.5 percent from November, -1.6 percent from a year ago) and alcoholic beverages purchased from stores (-4.1 percent and -1.3 percent) contributed the most to the deceleration in consumer prices. The CPI excluding food rose 2.1 percent on an annual basis in December.
Compared to a year ago, gasoline prices jumped 3.5 percent in December compared with November's decline of 0.5 percent. Consumer prices excluding gasoline rose 1.8 percent year over year last month, after rising by 2 percent in November and 2.2 percent in October. On a monthly basis, gasoline prices are down 0.6 percent in December following no change in November.
Shelter price growth continued to slow down in December, but remains elevated rising 4.5 percent year over year, compared with a 4.6 percent increase in November. Rent is up 7.1 percent from December 2023, slowing down from November's 7.7 percent rise.
Prices for goods are down 0.1 percent from a year ago in December, after no change in November. Meanwhile, prices for services jumped 3.5 percent in December, the same pace as in November.
Compared to December 2023, the CPI is up 1.8 percent, slowing down a bit from the 1.9 percent pace set in November, but also in line with expectations in the Econoday survey of forecasters.
Excluding food and energy prices, the CPI fell 0.1 percent on a monthly basis, same as in November. Compared to a year ago, the core CPI is up 2.1 percent in December vs. a 1.9 percent increase in November.
The average of the Bank of Canada's 'Alternative measures' of annual core inflation for December is 2.5 percent.
The inflation data remains in line with the Bank of Canada's outlook for consumer prices, with the central bank expecting inflation to average close to its 2 percent target"over the next couple of years." This provides support for the central bank's plan to keep inflation"close to the middle" of the 1 percent to 3 percent range.
Statscan noted that the government introduced a temporary GST/HST break on certain goods on December 14, 2024. The major components impacted by the tax break were food; alcoholic beverages, tobacco products, and recreational cannabis; recreation, education, and reading; and clothing and footwear.
As a result, food purchased from restaurants (-4.5 percent from November, -1.6 percent from a year ago) and alcoholic beverages purchased from stores (-4.1 percent and -1.3 percent) contributed the most to the deceleration in consumer prices. The CPI excluding food rose 2.1 percent on an annual basis in December.
Compared to a year ago, gasoline prices jumped 3.5 percent in December compared with November's decline of 0.5 percent. Consumer prices excluding gasoline rose 1.8 percent year over year last month, after rising by 2 percent in November and 2.2 percent in October. On a monthly basis, gasoline prices are down 0.6 percent in December following no change in November.
Shelter price growth continued to slow down in December, but remains elevated rising 4.5 percent year over year, compared with a 4.6 percent increase in November. Rent is up 7.1 percent from December 2023, slowing down from November's 7.7 percent rise.
Prices for goods are down 0.1 percent from a year ago in December, after no change in November. Meanwhile, prices for services jumped 3.5 percent in December, the same pace as in November.
Market Consensus Before Announcement
Total CPI is expected to fall 0.4 percent on the month and to rise 1.8 percent from a year ago versus 0.0 percent on the month and 1.9 percent on year in November. December's monthly decline largely reflects the impact of a GST sales tax holiday that went into effect in December. The slower yearly CPI increase shows the impact of slower food price growth, which offsets an increase in energy inflation.
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.
