Inflation rate creeps up
OTTAWA — Canada’s overall annual inflation rate crept up to 0.9 per cent in October, from 0.7 per cent in September, as lower fuel prices mostly offset other cost increases.
Statistics Canada said it was the first time since March 2004 that headline inflation recorded consecutive months below one per cent.
Alberta, with its red-hot economy, bucked the national trend with higher, but declining inflation. Overall, the province had three per cent inflation in October, compared to 3.7 per cent in September.
In the two big cities, Edmonton’s inflation rate slipped to 1.9 per cent, compared to 2.3 per cent in September. Calgary’s rate was 4.2 per cent in October, down from 5.1 per cent in September.
Nationally, other measures of inflation were higher.
With energy taken out of the mix, year-over-year inflation was at 2.0 per cent.
And the core consumer core price index — which ignores volatile factors such as energy and food, and is used by the Bank of Canada to monitor its inflation control — was 2.3 per cent higher than in October 2005.
The statistics are being buffeted by turbulent energy prices, observed Aron Gampel, deputy chief economist at Scotiabank.
“The overall inflation is being completely sideswiped by these wide swings in energy prices,” he said.
“You just buckle your seatbelt and go onwards and upwards because … who knows where they’re going to go?”
He said as the price index moves away from the huge energy cost increases a year ago in the wake of Hurricane Katrina, the numbers change dramatically.
“Energy prices are coming down, the total index now looks to be getting back into low single digits on a year-over-year basis, where the underlying trends are still probably at relatively high levels compared to recent years.”
Andrew Gretzinger, senior economic analyst at MFC Global Investment Management in Toronto, said the rise in core inflation “suggests that underlying demand remains pretty good.”
However, “I think inflation has crested,” Gretzinger added.
“I think it will slowly tick lower in the months ahead as activity, especially in Quebec and Ontario, slows.”
There were several upward price pressures, Statistics Canada reported.
Homeowners’ replacement cost, based on new housing prices, rose 8.8 per cent between October 2005 and October 2006. That increase was largely driven by a 48.3 per cent jump in Alberta.
Mortgage interest cost rose four per cent, the largest 12-month increase since May 2001.
And electricity prices rose 6.9 per cent year-to-year.
But prices for natural gas, heating oil and computer equipment and supplies all fell.
The natural gas index was down 16.4 per cent from October 2005, with Alberta recording a 37.7 per cent drop, as rising gas inventories pushed down prices.
The average cost of heating oil and other fuels was also down on an annual basis, with Quebec, Ontario and Nova Scotia recording double-digit drops.
The cost of computer equipment and supplies fell 19.9 per cent.