Inflation in Canada Tops Early Pandemic Levels on Shelter Costs
(Bloomberg) -- Price pressures in Canada accelerated past pandemic levels for the first time, led by rising shelter costs.
Annual inflation accelerated to 1% in November, compared with 0.7% in October, Statistics Canada reported Wednesday in Ottawa. Economists had expected 0.8%, the median forecast in a Bloomberg survey.
While November was the strongest reading since February, inflation remains well below the Bank of Canada’s 2% target, consistent with policy makers’ view that price pressures will stay low for years as businesses damaged by Covid-19 containment measures struggle to raise prices. Core inflation, a better measure of underlying pressure, held steady.
“We have to keep monitoring it but I don’t think right now there’s much heat,” James Marple, economist at Toronto-Dominion Bank, said by phone. It’s “not anywhere near the point where it’s going to raise any alarms or bells.”
Shelter costs contributed most to the increase in November. Higher demand, rising costs for building materials and a low inventory of homes for sale in some markets helped lift prices for new units, Statistics Canada said. Also, rent prices rose 1.5% in November, compared with a year earlier.
Rising replacement costs for homes in Canada are “currently the single biggest driver of inflation,” Doug Porter, chief economist at Bank of Montreal, said in a report to investors. He noted that overall shelter costs, which include utilities, are up a moderate 1.9% year-over-year pace, which is “remarkably close to target.”
The story of inflation since the pandemic has been one of rising prices for food and shelter, while clothing and transportation costs are still well down.
Excluding gasoline, the Consumer Price Index rose 1.3% in November, up from 1% in October.
The average of the core inflation measures -- often seen as a better gauge of underlying price pressures -- held steady at 1.7% in November. Economists were forecasting core inflation readings to remain unchanged.
On a monthly basis, prices rose 0.1%, compared with a flat forecast in the Bloomberg survey.
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