Canada’s inflation problem is getting worse, as the latest reading jumped to a multi-year high. The Consumer Price Index (CPI) ripped higher in October, according to Statistics Canada (Stat Can). Annual growth reached an 18-year high in the latest data, though you’d be lucky if your expenses increased by only that much. The majority of the country’s population lives in provinces with readings up to 42% higher.
Canadian Inflation Hits An 18-Year High
Canadian inflation is rising at a breakneck speed still. Annual growth for the CPI reached 4.7% in October, up from 4.4% reported in September. This was the highest reading since 2003, when interest rates were 13x higher than today.
Stat Can said when excluding energy prices, inflation drops to 3.3% growth. It’s still 50% higher than the central bank’s target rate of 2% though. Plus, this is kind of a useless metric since you can’t really get rid of the cost of fuel.
Canadian Consumer Price Index (CPI)
The 12-month change in consumer prices for Canadians at the national level.
Source: Statistics Canada; Better Dwelling.
Housing and Gasoline Are Driving Inflation Higher
All eight major components of CPI showed higher than target growth. The Transportation and Shelter components were significantly higher though.
Transportation showed annual growth of 10.1% in October. This was led by the subcomponent of gasoline, which composed 47% of the annual growth. Higher energy costs in-general have begun to surface as a problem.
Shelter showed annual growth of 4.8%, which seems almost reasonable in contrast. Though this component is a much larger share of expenses and the largest CPI component. The increase was driven by rising homeowner replacement costs. These are closely linked to construction costs for new homes. It was weighed down by mortgage interest. It’s more expensive to do things but the central bank has made it cheaper to borrow to do them. That’s, uh, one solution.
Canadian Provinces Are Experiencing Up To 42% More Inflation
As high as inflation is, some provinces wish it was that low — especially most of the Maritimes. PEI (+6.6%), New Brunswick (+5.5%), and Nova Scotia (+5.4%) led the country with the highest growth for inflation. That’s up to 42% higher than the national index and more than 3x the target rate.
Canadian Consumer Price Index (CPI) By Province
The 12-month change in consumer prices for Canadians broken down by province.
Source: Statistics Canada; Better Dwelling.
Inflation is so high at the provincial level, it’s faster to name provinces that are below average. The provinces are Saskatchewan (+3.2%), BC (+3.8%), Alberta (4.3%), and Newfoundland (+4.5%). The rest of the provinces showed much higher than average inflation costs.
Inflation relief should be on the way over the next few months, though it isn’t resolving by itself. The Bank of Canada (BoC) ended its use of quantitative ease (QE) last month. This was a tool they had been using to drive inflation higher. Yeah, we’re as shocked as you are. The BoC had used a tool to drive inflation higher until last month but claims it’s a mystery where the growth is coming from. It must be pandemic related. 🙄
A change in monetary policy generally takes a few months to trickle down to consumers. This should provide some relief by the Spring when they’re also expected to hike rates. The latter point has an even larger impact on driving inflation lower.
“Stat Can said when excluding energy prices, inflation drops to 3.3% growth.”
Oh man, I was really worried about inflation being super high but then I forgot to simply disregard the energy costs now everything is OK and I feel better. I’m rich again.