Annual inflation rate rose 0.5% in September: StatCan

Canada’s headline inflation measure went up in September by 0.5 per cent compared with a year ago, a betterthan-expected increase, but one that experts say won’t sway the Bank of Canada’s stimulus measures.

Economists had, on average, expected a year-over-year increase of 0.4 per cent, according to financial data firm Refinitiv, following readings of 0.1 per cent increases in August and July.

The consumer price index for food was up 1.6 per cent last month, a slight slowing from the 1.8 per cent bump recorded in August. Passenger vehicle prices were up 2.7 per cent, and housing up 2.6 per cent.

Higher tuition fees, particularly in Alberta where a freeze was lifted, helped boost the reading.

But underneath the headline figure were signs of ongoing weakness in the Canadian economy.

Back-to-school shopping season wasn’t as big as a year ago, noted by a drop of 4.1 per cent in clothing and footwear prices.

Air transportation prices fell by 3.2 per cent in September compared to a 16 per cent drop in August, bucking the traditional fall trend of sharp declines as demand weakens after the summer travel season that this year was largely grounded by COVID-19. With so few flights during the summer, September’s decline is less pronounced

Gasoline prices were down 10.7 per cent from a year earlier. The agency said the consumer price index would have increased by one per cent in September had the price of gasoline not been factored in.

The soft inflation figures are the backdrop for stimulus the Bank of Canada has rolled out since the start of the pandemic, slashing its key policy rate to 0.25 per cent and snapping up government debt at an unprecedented rate.

In September, the average of Canada’s three measures for core inflation, which are considered better gauges of underlying price pressures and closely tracked by the Bank of Canada, was about 1.7 per cent.

The central bank will update its economic and inflation outlook next week, but has said it won’t raise its key rate from near-zero until inflation is back at its two-per-cent target.

The bank’s quarterly business outlook survey suggested companies expect inflation to remain below two per cent for the next two years. The companion survey of consumers found respondents’ inflation expectations for the next year had declined.