The annual rate of inflation slowed to 1.9 per cent in November, Statistics Canada said Tuesday.
The agency cited a “broad-based” slowing in price hikes, particularly on travel tours and on mortgage costs, contributing to the cooling off.
That’s down from an inflation rate of two per cent in October.
The November inflation data comes as the Canadian economy struggles and the Bank of Canada trims its key interest rate, looking to stimulate growth heading into 2025.
The Canadian meanwhile dollar dipped below 70 cents to its U.S. counterpart for the first time since the early days of the COVID-19 pandemic on Tuesday morning, continuing a rough close to 2024 for the loonie.
The loonie has largely faltered over recent weeks compared to the U.S. dollar as the re-election of Donald Trump south of the border sparks uncertainty and a flood of investor dollars into the American greenback.
That puts pressure on the cost of imports from south of the border, often affecting prices on autos and some groceries.
“Today’s drop in the Canadian dollar is the result of several headwinds that it has faced this year, including falling inflation, weak economic growth, and now political uncertainty, which together have sent it to the lowest level since March 2020,” said Kyle Chapman, market analyst on foreign exchange at Ballinger Group, in an email to Global News on Tuesday.
Price hikes less swift, some bumps mirrored Eras Tour
On a month-to-month basis, StatCan said gasoline prices were steady in November.
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Prices in food at the grocery store were up 2.6 per cent annually, also down a tick from October’s figures.
Black Friday sales also helped to drive prices down last month, particularly on cellular services and furniture. A monthly decline of 4.9 per cent in the cost of children’s clothing was the largest ever on record for November, the agency said.
While rents were higher annually in provinces including Ontario, Manitoba and Nova Scotia, StatCan said that a cooldown in the mortgage interest cost index helped to tame shelter inflation last month. While mortgage interest costs are still rising, they’re not rising as much as they were a year ago.
Mortgage costs and rent are still the two biggest contributors pushing inflation higher in Canada.
Though cheaper costs for travel tours were helping to cool inflation last month, StatCan did note that the cost of renting a room in Ontario rose markedly in November, around the same time Taylor Swift’s Eras Tour came to Toronto.
The cost to rent a hotel room in November rose 23.7 per cent annually, compared to 1.3 per cent in October.
“On a monthly basis, prices for traveller accommodation in Ontario were up 11.0 per cent, the swiftest monthly increase ever recorded for the month of November, coinciding with a series of high-profile concerts,” the agency wrote.
CIBC senior economist Andrew Grantham said in a note to clients on Tuesday that the impact of the Taylor Swift concerts on inflation was weaker than expected.
“While there was a pop in hotel prices, there was no noticeable change in airline fares, restaurant prices or other areas,” Grantham said.
Overall inflation has cooled significantly over recent years, but the cost of living remains elevated in Canada. Compared to three years ago, grocery prices are 19.6 per cent higher, while shelter costs are up 18.9 per cent over the same period, according to the StatCan.
Bank of Canada rate cut pace to slow
Though the Bank of Canada delivered back-to-back oversized rate cuts of 50 basis points at its two latest meetings, the central bank has signalled that the pace of easing could well slow heading into the new year.
In his year-end speech in Vancouver on Monday, Bank of Canada governor Tiff Macklem reiterated that the central bank will be evaluating the need for further reductions in the policy rate one decision at a time and anticipates a more gradual approach to monetary policy if the economy evolves as expected.
Tuesday’s report showed the Bank of Canada’s preferred core measures of inflation held steady at 2.6 and 2.7 per cent.
The federal government’s “tax holiday,” which kicked off on Saturday and will stretch for two months, is set to warp headline inflation figures in the month ahead. The Bank of Canada is expecting inflation will dip down to 1.5 per cent in January before rebounding in mid-February when the reprieve on GST and HST ends on a number of household items.
Grantham said that the central bank will likely be paying more attention to any slack building up in the Canadian economy, rather than fluctuations in the consumer price index, in gauging its next moves.
CIBC continues to project a quarter-point cut from the Bank of Canada at its next decision on Jan. 29.
Currency markets see a 55 per cent chance of another cut of 25 basis points next month, according to Reuters.
Douglas Porter, chief economist at BMO Capital Markets, said the latest report points to a more gradual path for rate cuts in 2025.
“While we expect a further trim on Jan. 29, another meaty set of core readings next month will prompt some chattering about a pause, especially with the (U.S.) Fed seemingly headed that way in January and the loonie on the ropes,” he said in a note to clients.
— with files from The Canadian Press and Reuters
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