TORONTO — The latest inflation reading due out Tuesday from Statistics Canada is expected to show a slight uptick for the month of October — but economists say the measure is still on a longer-term downward trend.
Economists polled by Reuters expect the consumer price index to come in at 1.9 per cent for October, up from 1.6 per cent in September which was the lowest inflation reading since February 2021.
The price of gasoline was a key reason the September number came in so low, as oil dropped to a low of around US$65 per barrel at one point. It’s also expected to be a driver for the increase in October, when it crested US$75 per barrel.
“We’re expecting headline to go back up to two per cent, but just like how it dropped down to 1.6 per cent, it’s mostly an energy story,” said RBC economist Claire Fan.
The expected inflation increase is in part based on shifts in last year’s baseline and shouldn’t be seen as a move away from progress on getting the measure down, she said.
“The broad story really is that this low inflation, or progressively easing inflation pressure, it’s still very much the trend,” Fan said.
Excluding the volatile measures of energy and food — which Fan expects to remain steady at 2.8 per cent — core inflation should tick lower to 2.2 per cent in October from 2.4 per cent in September, she said.
BMO Capital Markets sees headline inflation coming in at 1.9 per cent and core inflation at 2.4 or 2.5 per cent, said Benjamin Reitzes, its managing director of Canadian rates & macro strategist, in a note.
“October looks to be a bump in the road for the downward trend in inflation. Prices didn’t exactly surge in the month, but base effects are challenging, suggesting that headline and core inflation will accelerate modestly.”
Along with a mild increase in gasoline prices, he expects surging property taxes to be a key driver for the increase. Rising taxes will help push up shelter costs, but it will be offset from a smaller increase in mortgage interest costs after the Bank of Canada cut interest rates again in October.
High mortgage payments due to interest rates and a wave of mortgage renewals have been putting upward pressure on shelter inflation, but the downward trend in rates should start to relieve pressure on shelter inflation, said Fan.
“On a month-over-month basis, I think we are, if anything, very close to an inflection point.”
The Bank of Canada lowered its key rate by half a percentage point in October to 3.75 per cent, the fourth drop since June.