Canadian November Core Inflation Rate Slows to 2.2 Percent
Canada’s consumer prices excluding eight volatile items such as energy and fruit advanced 2.2 percent in November from a year earlier, as food and shelter costs rose.The core inflation rate, which tracks prices minus the eight goods and the impact of tax changes, slowed from October’s 2.3 percent pace, Statistics Canada said today in Ottawa. Core prices rose 0.3 percent in November from October. The overall consumer price index rose 0.2 percent during the month and was 1.4 percent higher than in November 2005.
Economists predicted annual core inflation would advance 2.1 percent, and rise 0.2 percent in November, according to surveys by Bloomberg News. Overall inflation was expected to rise 0.3 percent in the month and 1.5 percent from a year ago.
Bank of Canada Governor David Dodge says the risks of inflation straying from policy makers’ 2 percent target are balanced between higher consumer spending and home prices and slower exports. Dodge uses core inflation as his preferred guide to future trends, and says he’s ignoring the temporary impact of a July federal sales-tax cut on total inflation.
Housing costs, which account for 27 percent of Canada’s consumer price index, rose 2.9 percent in November from a year earlier. Food prices rose 3.1 percent, Statistics Canada said. Energy prices fell 2.8 percent.
Economists in another Bloomberg News survey this month said the Bank of Canada will cut its 4.25 percent benchmark interest rate a quarter point in the third quarter of 2007 because of a lingering economic slowdown.
Economic Growth
Canada’s economy grew at the slowest annual pace in three years during the third quarter, as residential construction and manufacturing fell. The fourth quarter hasn’t shown improvement, with factory shipments falling for the third-straight month in October to the lowest in almost two years.
The Canadian dollar’s rise to a 28-year high in May and slower U.S. demand has hit exports, and there’s no sign of a quick turnaround, economists such as Don Drummond at Toronto- Dominion Bank say.
DaimlerChrysler AG, the world’s largest truck maker, plans to lay off 800 employees at a St. Thomas, Ontario, Freightliner plant starting in March, because it expects sales to drop.
Still, there are signs inflation will persist in the months ahead. Existing-home prices will rise 6.5 percent next year even as sales fall 3 percent, Royal LePage Real Estate Services said Dec. 14.
Canada’s jobless rate was 6.3 percent in November, close to the three-decade low of 6.1 percent set in May and June. Half of small businesses plan to raise wages more than 2 percent next year, the Canadian Federation of Independent Business says.
Also, record energy and metals prices have commodities companies boosting production and scrambling to find enough workers. Suncor Energy Inc., the world’s biggest developer of oil from tar sands in the western province of Alberta, estimated last month that its annual capital spending on oil-sands projects will rise 43 percent through at least 2010.