Canada’s yearly inflation rate increased to 2.4% in September, driven by higher grocery prices and a slower decline in gas and travel tour costs, according to Statistics Canada’s report on Tuesday. Economists had anticipated a 2.2% rise in the headline figure. Excluding gas, the annual inflation rate surged to 2.6%, as stated by the data agency.
During September, shoppers experienced a 4% uptick in grocery expenses compared to the same period last year, mainly due to pricier fresh produce and sugary items. Statistics Canada noted that grocery inflation has been on the rise since April 2024, with fresh and frozen beef and coffee contributing to the upward trend due to low supply.
Nathan Janzen, RBC’s assistant chief economist, highlighted the volatility of food prices in Canada, emphasizing that food price growth has consistently outpaced overall inflation rates in recent years. Additionally, rental prices played a significant role in pushing inflation up to 4.8% year-over-year, with shelter costs being the largest component in the inflation basket.
Meanwhile, gas prices moderated their decline in September, dropping by 4.1% on an annual basis compared to the previous year. Last year, prices had fallen due to a decrease in crude oil prices driven by concerns over weak economic growth in the U.S. and China. However, refinery disruptions in the U.S. and Canada caused petrol prices to rise last month, according to Statistics Canada.
Travel tour expenses also decreased at a slower pace year-over-year in September. Despite the usual monthly price declines during this season, prices increased by 4.6% from August, partly due to major events in the U.S. and Europe leading to higher hotel costs.
The September inflation report serves as the final data release before the Bank of Canada’s upcoming interest rate meeting on October 29. Although inflation remains within the Bank of Canada’s target range of one to three percent, it has surpassed the midpoint of that range. This may influence the bank’s decision at the upcoming meeting.
Looking ahead, most forward-looking indicators suggest that inflation is likely to slow rather than increase. The central bank typically focuses on core inflation measures that exclude volatile sectors like gas, with two of these measures currently exceeding three percent, above the bank’s target range. Market analysts are now reconsidering the expectation of a rate cut at the upcoming meeting, with differing opinions on the potential decision.