A shopper leaves a Toronto supermarket with groceries in this file photo. Statistics Canada said Tuesday the annual rate of inflation eased to 6.3 per cent in December.Alex Lupul/The Canadian Press
Canada’s inflation rate eased in December alongside a steep drop in gasoline prices, an encouraging sign for the Bank of Canada as it considers further increases in interest rates.
It was the latest in a string of promising developments for inflation. The U.S. rate is continuing to fall, while prices for many resources – such as lumber and natural gas – have dropped. Companies in several industries have reported that supply chain disruptions – a key factor in recently driving up prices – are improving, too.
“Obviously, Canadians got a pretty big break in December, with the decline in gasoline prices. That left more money in the pockets of Canadians to spend elsewhere,” said Royce Mendes, head of macro strategy at Desjardins Securities, in an interview.
The Consumer Price Index rose 6.3 per cent in December from a year earlier, down from a 6.8-per-cent pace in the previous month, according to figures published Tuesday by Statistics Canada. Financial analysts were expecting an inflation rate of 6.4 per cent. CPI growth appears to have peaked at 8.1 per cent in June.
Consumer prices fell 0.6 per cent during the month of December, highlighted by a 13-per-cent plunge for gasoline, the largest monthly decline at the pumps since the early stages of the COVID-19 pandemic.
Despite the improvement, Mr. Mendes cautioned that core measures of inflation were proving sticky and remained well above the Bank of Canada’s 2-per-cent target.
For instance, after excluding food and energy – two of the more volatile components of the CPI – prices rose 5.3 per cent on an annual basis, a slight deceleration from 5.4 per cent in November.
“The job is nowhere close to being done, just yet, in terms of getting inflation back to 2 per cent,” Mr. Mendes said.
Tuesday’s inflation report will be a key consideration for the Bank of Canada as it weighs whether to raise its policy rate for an eighth consecutive time on Jan. 25.
The central bank says it is nearing the end of its rate-hike campaign, with decisions now hinging on the quality of economic data. Many analysts expect the bank to hike its policy rate by 25 basis points to 4.5 per cent next week, particularly after strong job growth in December. (A basis point is 1/100th of a percentage point.) The key lending rate was locked at 0.25 per cent for close to two years, before the rate-hike cycle began in March, 2022.
Higher interest rates appear to be having their intended effect, according to a pair of Bank of Canada surveys published on Monday. Consumers say they are reducing their spending in response to high inflation and rising interest rates, while a growing proportion report they are delaying purchases. Many companies, meanwhile, expect their sales to slow over the coming year.
There were signs of weaker consumption in Tuesday’s report. Price growth for durable goods is slowing quickly. For example, the cost of household appliances fell 4.1 per cent in December, the largest month-over-month decline on record. Furniture prices also dropped.
“These slowdowns in price growth occurred amid easing supply chain pressures and lower shipping costs, as well as softer demand,” Statscan said in its release.
At the same time, there are persistent aspects of lofty inflation. Grocery prices rose 11 per cent in December on an annual basis, down from 11.4 per cent in November. Those prices are still growing near the highest rates in several decades, a continuing frustration for consumers.
Mortgage interest costs have jumped 18 per cent over the past year, on account of the rapid rise in borrowing rates. Rents have risen 5.8 per cent over the year. Mortgages are now the largest contributor to the annual rate of inflation, with rents making the third-largest contribution.
In recent months, analysts have paid close attention to short-term trends in price growth to get a sense of how pressures are changing. Specifically, they have looked at the three-month change in core inflation, excluding food and energy, expressed at an annualized rate. In December, this measure dipped to 3.7 per cent.
Karyne Charbonneau, executive director of economics at CIBC Capital Markets, suggests also excluding mortgage costs from that calculation. That’s because the Bank of Canada is raising interest rates to tamp down inflation, although that is having the opposite effect for interest payments on home loans.
When mortgage interest is removed, the short-term trend for core inflation is about 2.5 per cent, she said.
“The good news is that inflation is easing, and that will become more noticeable when the big monthly increases seen this past spring start to drop out of the annual calculation this year,” Ms. Charbonneau wrote in a note to clients. “Moreover, core inflation excluding mortgage costs is growing at a pace much closer to target.”
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
VICTORIA – British Columbia is forecasting a record budget deficit and a rising debt of almost $129 billion less than two weeks before the start of a provincial election campaign where economic stability and future progress are expected to be major issues.
Finance Minister Katrine Conroy, who has announced her retirement and will not seek re-election in the Oct. 19 vote, said Tuesday her final budget update as minister predicts a deficit of $8.9 billion, up $1.1 billion from a forecast she made earlier this year.
Conroy said she acknowledges “challenges” facing B.C., including three consecutive deficit budgets, but expected improved economic growth where the province will start to “turn a corner.”
The $8.9 billion deficit forecast for 2024-2025 is followed by annual deficit projections of $6.7 billion and $6.1 billion in 2026-2027, Conroy said at a news conference outlining the government’s first quarterly financial update.
Conroy said lower corporate income tax and natural resource revenues and the increased cost of fighting wildfires have had some of the largest impacts on the budget.
“I want to acknowledge the economic uncertainties,” she said. “While global inflation is showing signs of easing and we’ve seen cuts to the Bank of Canada interest rates, we know that the challenges are not over.”
Conroy said wildfire response costs are expected to total $886 million this year, more than $650 million higher than originally forecast.
Corporate income tax revenue is forecast to be $638 million lower as a result of federal government updates and natural resource revenues are down $299 million due to lower prices for natural gas, lumber and electricity, she said.
Debt-servicing costs are also forecast to be $344 million higher due to the larger debt balance, the current interest rate and accelerated borrowing to ensure services and capital projects are maintained through the province’s election period, said Conroy.
B.C.’s economic growth is expected to strengthen over the next three years, but the timing of a return to a balanced budget will fall to another minister, said Conroy, who was addressing what likely would be her last news conference as Minister of Finance.
The election is expected to be called on Sept. 21, with the vote set for Oct. 19.
“While we are a strong province, people are facing challenges,” she said. “We have never shied away from taking those challenges head on, because we want to keep British Columbians secure and help them build good lives now and for the long term. With the investments we’re making and the actions we’re taking to support people and build a stronger economy, we’ve started to turn a corner.”
Premier David Eby said before the fiscal forecast was released Tuesday that the New Democrat government remains committed to providing services and supports for people in British Columbia and cuts are not on his agenda.
Eby said people have been hurt by high interest costs and the province is facing budget pressures connected to low resource prices, high wildfire costs and struggling global economies.
The premier said that now is not the time to reduce supports and services for people.
Last month’s year-end report for the 2023-2024 budget saw the province post a budget deficit of $5.035 billion, down from the previous forecast of $5.9 billion.
Eby said he expects government financial priorities to become a major issue during the upcoming election, with the NDP pledging to continue to fund services and the B.C. Conservatives looking to make cuts.
This report by The Canadian Press was first published Sept. 10, 2024.
Note to readers: This is a corrected story. A previous version said the debt would be going up to more than $129 billion. In fact, it will be almost $129 billion.
NANAIMO, B.C. – Former Bank of Canada governor Mark Carney says he’ll be advising the Liberal party to flip some the challenges posed by an increasingly divided and dangerous world into an economic opportunity for Canada.
But he won’t say what his specific advice will be on economic issues that are politically divisive in Canada, like the carbon tax.
He presented his vision for the Liberals’ economic policy at the party’s caucus retreat in Nanaimo, B.C. today, after he agreed to help the party prepare for the next election as chair of a Liberal task force on economic growth.
Carney has been touted as a possible leadership contender to replace Justin Trudeau, who has said he has tried to coax Carney into politics for years.
Carney says if the prime minister asks him to do something he will do it to the best of his ability, but won’t elaborate on whether the new adviser role could lead to him adding his name to a ballot in the next election.
Finance Minister Chrystia Freeland says she has been taking advice from Carney for years, and that his new position won’t infringe on her role.
This report by The Canadian Press was first published Sept. 10, 2024.
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