Canada’s inflation rate slows to 3.8%

October 17, 2023

Canada’s inflation rate decelerated to 3.8 per cent in September, down from four per cent in August.

The figure, which was reported by Statistics Canada on Tuesday, was lower than economists were expecting.

The data agency said the deceleration in the cost of living was “broad-based” and stemmed from lower prices for a variety of goods and services, including travel, durable goods and some grocery items.

On a monthly basis, the cost of living actually declined in September, by 0.1 per cent. That’s the first time that’s happened since November of last year.

Gasoline prices fell by 1.3 per cent during the month, but they’re still up by 7.5 per cent in the past 12 months, which is why fuel costs were one of the biggest factors pushing up the annual rate.

If gasoline is stripped out of the inflation numbers, the rate would have been 3.7 per cent. That’s down from 4.1 per cent the month before.

Some relief in the grocery aisle

Grocery prices continued to increase, but at a much slower rate. Year over year, the cost of filling up a grocery basket has risen by 5.8 per cent. That’s down from more than 11 per cent this time last year, and it’s because price increases for many food items are slowing down — and actually declining for things like bacon, bananas, grapes, and some types of cheese.

“Large monthly gains in September 2022, when grocery prices increased at the fastest pace in 41 years, fell out of the 12-month movements and put downward pressure on the indexes,” Statistics Canada said.

Benjamin Reitzes, an economist with the Bank of Montreal, says the inflation report paints a picture of an economy that is cooling down, and makes it all but certain that the Bank of Canada will holds rates steady when it meets next week.

“The level of inflation remains much too high for comfort, but the trend is the Bank of Canada’s friend here,” he said.

“Given that inflation is the most lagging of indicators, and the economy is clearly weakening, we’re likely to see ongoing disinflationary pressure … there’s no need for further rate hikes in Canada.”

CBC/MS