By Paul Vieira
OTTAWA -- Canada's annual inflation rate decelerated in November on lower gasoline prices and further declines in the cost of fresh fruit and vegetables.
The all-items consumer-price index in November climbed 1.2% from a year earlier, Statistics Canada said Thursday, compared with a 1.5% increase in October and a 1.3% advance in September. Market expectations were for a 1.4% advance in November, according to economists at Royal Bank of Canada.
On a month-over-month basis, headline consumer prices declined 0.4% in November.
Meanwhile, Canada introduced in November three new measures in a bid to capture a more accurate take on underlying, or core, inflation. Based on the new measures, annual growth in core inflation rose in a range from 1.3% to 1.9%.
Prior to the report economists said inflation showed no immediate signs of picking up and causing concern for the Bank of Canada, due to the amount of spare capacity still prevailing in the economy after the fallout from the commodity-price swoon. The Bank of Canada sets interest-rate policy to achieve and maintain 2% headline inflation, and the widespread consensus has the Canadian central bank on hold until 2018.
The new wrinkle in this inflation report is the introduction of the three new measures -- CPI-common, CPI-median and CPI-trim -- aimed at better capturing underlying price movements. The change stems from the Bank of Canada's dissatisfaction with the previous measure for core inflation, which excluded some of the most volatile products, such as food and energy.
The Bank of Canada says it intends to make use of all three indicators and will discuss core inflation asa range, rather than a precise rate when it provides an analysis of the Canadian economy.
According to Statistics Canada, CPI-common, which tracks common price changes across categories, rose 1.3% on a 12-month basis in November. CPI-median, which reports year-over-year price changes for consumer products that were in the middle of the pack, climbed 1.9%. And CPI-trim, which attempts to show the average rate of inflation after "trimming" goods at both the high and low end of price gains, advanced 1.6%.
"Unlike the three bears, the inflation soup was too cold in all of the three new core measures," said Avery Shenfeld, chief economist at CIBC World Markets, in reference to all three coming in below the Bank of Canada's 2% target.
Economists didn't provide forecasts for the new measures, and some analysts aren't sure they will be able to do so in the future given the complex methodology involved.
In terms of total inflation, food prices in November declined on an annual basis for a second straight month, down 0.7%. Within the component, meat prices fell 2%; fresh fruit were down 4.5%; and fresh vegetables fell 4.7%.
Clothing and footwear prices also declined 1.2% on a 12-month basis. This could reflect some deep discounting by retailers in the lead-up to the Christmas holiday shopping season. Meanwhile, gasoline prices fell 1.7%.
Helping to offset the decliners was a 2.1% rise in the housing and shelter component, with electricity prices the principal upward contributor to the 12-month gain.
On a seasonally adjusted monthly basis, Canadian prices declined 0.2% in November after a 0.2% increase in the previous month, the data agency said.
Write to Paul Vieira at email@example.com
(END) Dow Jones Newswires
December 22, 2016 09:13 ET (14:13 GMT)
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