Canada’s consumer price inflation accelerates in December, likely to move higher in months ahead

Canada’s consumer price inflation rose in December; however, it came in lower than market expectations. Canada’s inflation, gauged by consumer price index, accelerated to 1.5 percent year-on-year in December from November’s 1.2 percent. The price growth was mainly driven by a recovery in gasoline prices, which rose 5.5 percent year-on-year after falling 1.7 percent in the prior month. Shelter costs have stayed a vital source of price growth, which rose 3 percent, the same rate as in November.

Meanwhile, prices of food were a drag on inflation, dropping 1.3 percent year-on-year. The fall in food prices was driven by declines in vegetables and fresh fruit. Of the Bank of Canada’s new trio of core inflation measures, just CPI-common accelerated in December to a moderate 1.4 percent from 1.3 percent in November. CPI-median remained stable at 2 percent, whereas CPI-trim stayed at 1.6 percent, noted TD Economics.

Increasing energy prices are expected to keep on pushing the headline pace of inflation higher in the coming several months. This is mainly a base effect following from a sharp drop in oil prices a year ago. The message in the three core inflation measures were consistent, indicating restricted wide price pressures throughout the Canadian economy.

“Inflation is likely to remain benign over the next year, reflecting continued economic slack and a slow rotation in growth drivers”, added TD Economics.