Canada’s yearly inflation rate surged to 2.4 percent in September, driven by higher grocery prices and a slower decline in gas and travel tour costs, as per Statistics Canada on Tuesday. Economists had anticipated a 2.2 percent figure. Excluding gas, the annual inflation rate went up to 2.6 percent, according to the data agency.
During September, shoppers faced a four percent increase in grocery expenses compared to the same period last year, primarily due to elevated prices of fresh vegetables and sugary items. Statistics Canada noted a consistent uptrend in grocery inflation since April 2024, with fresh and frozen beef and coffee contributing to the escalation, partly due to limited supply.
Nathan Janzen, RBC’s assistant chief economist, highlighted the volatility of food prices in Canada, mentioning that food price growth has been persistently high, surpassing the overall inflation rate in recent years. Rental costs also played a significant role in driving inflation up, rebounding to 4.8 percent year-over-year, with shelter prices being a key component in the inflation basket.
Gas prices experienced a milder yearly decline of 4.1 percent in September compared to the previous year, attributed to refinery disruptions in the U.S. and Canada, leading to higher petrol costs. Similarly, travel tour expenses registered a slower annual decrease in September, rising by 4.6 percent from August due to increased hotel rates during major events in the U.S. and Europe.
The September inflation report precedes the Bank of Canada’s upcoming interest rate meeting on Oct. 29. Although inflation remains within the bank’s target range of one to three percent, it has surpassed the midpoint of that range. Forward-looking indicators suggest a potential slowdown in inflation rather than a further increase.
Bank of Montreal’s chief economist, Douglas Porter, noted that despite market expectations of a rate cut, the latest data could influence the Bank of Canada’s decision. While Capital Economics anticipates another rate cut following concerns raised by Bank of Canada Governor Tiff Macklem, a stronger jobs report for September might mitigate expectations for an immediate rate reduction.