Food Price Gains Slow in November but Headline Inflation Holds Steady

Food price gains slowed again as the overall Canadian inflation rate held steady in November, defying expectations for a decline. 

Grocery store food prices were up 4.7% last month – still above the overall 3.1% inflation rate – but down from the 5.4% increase in October, according to Tuesday’s Statistics Canada Consumer Price Index. 

November marked the fifth consecutive month that grocery price growth slowed year over year, with prices for non-alcoholic beverages (-0.6%), fresh vegetables (+2.5%) and other food preparations (+6.4%) contributing the most to the slowdown. In contrast, prices for meat, which were up 5% in November, preserved vegetables and vegetable preparations (+5.8%) and sugar and confectionery (+8.3%) increased at a faster pace on a year-over-year basis in November compared with October. 

The headline inflation rate exceeded market expectations, with most economists and analysts expecting a more modest 2.9% gain in November. On a monthly basis, inflation was up 0.1%, also steady from October. 

November's steady rate of inflation from October saw higher prices for travel tours offset slower price growth for groceries, and lower prices for cellular services and fuel oil. 

Along with food, mortgage costs – which jumped 29.8% - and rent (+7.4%) were the largest contributors to the year-over-year increase in November inflation. 

The November inflation rate remains above the Bank of Canada’s target of 2% and now casts some doubt on whether the Bank will begin reducing its key overnight lending rate – now at a more than two-decade high of 5% - as soon as January.