Canadian prices, as measured by the Consumer Price Index (CPI), rose 3.4 per cent on a year-over-year basis in December, up from a 3.1% increase in November.
The increase was largely driven by base-year effects from gasoline, which were low in December of 2022. Excluding energy costs, CPI rose 3.7 per cent year-over-year in December, down from 3.8 per cent in November.
Shelter costs continue to be a major driver of inflation, with mortgage interest costs up 28.6 per cent and rent up 7.7 per cent from last year in December. Grocery price inflation remained unchanged from November at 4.7 per cent year-over-year in December. Month over month, seasonally adjusted CPI rose 0.3 per cent.
In BC, consumer prices rose 3.4 per cent year-over-year. The Bank of Canada’s preferred measures of core inflation, which strip out volatile components, remained between 3.5 and 4 per cent per cent year-over-year in December.
Despite a disappointing uptick in the year-over-year percentage change in CPI, the general picture remains similar. CPI is stubbornly high, still within the 3-4 percent territory that it has occupied since roughly the spring.
Although gasoline prices drive volatility in the measure, including most of the December increase, shelter and food costs remain well above their pre-pandemic norms and are causing the CPI to remain broadly elevated.
The annualized 3-month percentage change in the Bank of Canada’s preferred measures of inflation, including CPI-median and CPI-trim, both ticked up last month and remain between 3 and 4. Amid tepid GDP growth and softening labour markets, financial markets continue to expect the Bank of Canada to cut rates substantially by the summer of 2024, but this will, of course, depend on the rate of economic growth and price appreciation in the first half of the year.
