Canada’s annual inflation rate grew by 3.1 per cent on a yearly basis in November, matching October’s growth rate and defying economists’ expectations, many of whom predicted the rate would fall within the Bank of Canada’s target range of one to three per cent.

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Canadians continued to particularly feel the pinch of higher prices for mortgage payments, rent and food, Statistics Canada said on Dec. 19, as these were the largest contributors to the year-over-year increase in November. Mortgage interest costs rose 29.8 per cent, and the price of food and rent grew by 4.7 per cent and 7.4 per cent, respectively, the agency said.

On a monthly basis, the consumer price index rose by 0.1 per cent in November, which is the same growth rate as in October.

Prior to the announcement, economists surveyed by Bloomberg expected CPI to decelerate to 2.8 per cent. Economists from the Royal Bank of Canada, Bank of Montreal (BMO) and Desjardins expected the rate to drop slightly below three per cent, while Canadian Imperial Bank of Commerce expected it to hold steady at three per cent.

“Today’s moderately disappointing result drives home the point that we still have an inflation fight on our hands — in case there was really any doubt,” BMO chief economist Douglas Porter said in a note. “Still, the bigger picture remains intact: The underlying inflation trend is lower, the economy is chilly and the Bank (of Canada) is expected to begin trimming rates around mid-year.”

The lack of easing in the headline figure means the Bank of Canada won’t be easing policy as early as financial markets had been expecting heading into today’s release, CIBC Economics said in a note.

We still have an inflation fight on our hands — in case there was really any doubt

Douglas Porter, BMO chief economist

“However, if there was any good news from November’s CPI report, it was that drivers of inflation are becoming more narrowly based,” the note said, adding that CIBC still expects a first interest rate cut in June even if headline inflation hasn’t fully eased back to the Bank of Canada’s target of two per cent by that time.

The inflation figure was “not the Christmas present that the market or the Bank of Canada was expecting,” Marwa Abdou, senior research director at the Canadian Chamber of Commerce, said. “Given the more optimistic outlook south of the border, we expect the U.S. Federal Reserve to start the easing cycle in 2024 while the Bank of Canada, and most other central banks, sit back, hold the line and nervously wait for more durable progress on the inflation front,” she said.

However, she said the deceleration of food prices was a positive.

Food prices continued to rise, but the 4.7 per cent growth in November was slower than October’s 5.4 per cent increase.

“This marked the fifth consecutive month that grocery price growth slowed year over year,” Statistics Canada said.

Prices of non-alcoholic beverages and fresh vegetables contributed to the slowdown, but prices for meat, preserved vegetables and sugar and confectionary increased at a faster annual pace. Prices for meat increased by five per cent, while sugar and confectionary prices rose by 8.3 per cent.

Prices for services remained unchanged in November at 4.6 per cent. Travel tours were a key contributor to this segment as they rose 26.1 per cent in November on a yearly basis compared to an 11.3 per cent rise in October. This was mainly due to destination events held in certain cities in the United States, Statistics Canada said.

On the flip side, a variety of promotions led to consumers signing cheaper cellphone plans as they paid 22.6 per cent less than in November last year.

On the energy front, prices for fuel oil and other fuels fell 23.6 per cent at the national level in November, following a 12.6 per cent decline in October. The temporary suspension of the federal carbon levy on fuel oil contributed to the decline, said Statistics Canada.

Electricity prices, though, continued to increase, rising 8.2 per cent in November compared to last year after a 6.7 per cent annual increase in October. The rise in electricity prices was largely due to a seven per cent rise in prices in Ontario, where time-of-use rates increased.

• Email: nkarim@postmedia.com

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