Canada’s Inflation Rate Declines to 2.9% as Energy Price Increases Slow
2011-11-18 17:32:48
Canada’s annual inflation rate slowed for the first time in three months in October as energy- price gains faded while food costs increased.
The consumer price index rose 2.9 percent in October from a year earlier compared with a 3.2 percent pace in September and a May peak of 3.7 percent, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg News predicted a 2.8 percent reading according to the median of 24 estimates.
The annual core inflation rate, which excludes eight volatile items such as gasoline, slowed to 2.1 percent from September’s 2.2 percent pace that was the fastest since December 2008. Economists forecast 1.9 percent core inflation.
Bank of Canada Governor Mark Carney has said that he has “flexibility” in how soon he meets the bank’s 2 percent inflation target during the economic recovery. The central bank’s key interest rate has been 1 percent since September 2010 and its Oct. 25 policy announcement removed a reference to the need for reducing monetary stimulus.
“It’s a pretty firm report,” said Rudy Narvas, senior economist at Societe Generale, citing the rise in the core rate. The Bank of Canada is “going to err on the side of caution given global risks, that’s the key point.”
The Canadian dollar rose for the first time in five days, advancing 0.6 percent to C$1.0227 per U.S. dollar at 7:15 a.m. in Toronto. One Canadian dollar buys 97.78 U.S. cents.
The central bank projects inflation will slow to an average of 1 percent in the second quarter of next year and return to 2 percent at the end of 2013.
Slower Energy Gains
Gasoline prices rose 18.2 in October from a year earlier versus the September pace of 22.7 percent, Statistics Canada said. The gain in fuel oil prices also slowed to 22.1 percent from 27.4 percent in September. Natural gas prices fell 2.2 percent in October from a year ago.
Households paid 4.3 percent more for food in October than a year earlier and automobile insurance premiums rose 3.8 percent, Statistics Canada said.
On a monthly basis, overall consumer prices rose 0.2 percent in October, the same pace as the prior month. The core rate slowed to 0.3 percent from 0.5 percent. Economists surveyed by Bloomberg predicted monthly inflation of 0.1 percent for both measures.
On a seasonally adjusted basis, the total inflation rate slowed to 0.3 percent in October from the month before, compared with a revised 0.4 percent in September. The seasonally adjusted core rate slowed to 0.2 percent from 0.3 percent the month before.