Your Business News
Canada’s inflation had broad-based deceleration in September
October 17, 2023
Ryan Filipovic, CPA shared this article
REAL ECONOMY BLOG | October 17, 2023
Canada’s headline inflation rate declined to 3.8% in September from 4.0% in August, reversing the upward trend of the past three months and a sign of progress in the Bank of Canada’s efforts to restore price stability.
On a month-over-month basis, the consumer price index dropped by 0.1% for the first time this year. More important, all core inflation measures also declined, according to data released Tuesday by Statistics Canada.
Despite high gasoline prices and rising housing costs, there was a broad-based deceleration in price increases, most notably in groceries and some services.
The lagged impact of prior rate hikes is taking hold. As mortgage rates rise, households face much higher mortgage payments and have to cut back on discretionary spending.
Softening consumer demand leaves less room for businesses to raise prices. This trend is expected to continue, even though inflation is expected to remain above 3%.
Energy and gasoline prices might cause the headline inflation figure to fluctuate in the short run, but they will not alter the Bank of Canada’s efforts to tame inflation. The central bank will most likely not raise rates any further as weaker growth is expected through the year’s end.
Grocery prices rose by 5.9% on a year-over-year basis, down from 6.8% in August.
Some grocery chains, following conversations with the federal government, have promised price stabilization with price matching, price freezes and discounts, which helped slow price growth.
Price growth in restaurants also slowed. Even though worker strikes in grocery stores show that wage growth still places upward pressure on prices, businesses might not have much room left to raise prices without losing customers.
In a classic example of supply and demand, air fares dropped by a sharp 21.1% on an annual basis, which coincided with the increase in flights offered by airlines.
It’s another example of consumers being more careful in their discretionary spending including air travel and dining out.
Gasoline prices rose by 7.5% on a year-over-year basis because of comparisons to last year’s lower levels, but on a monthly basis gasoline prices fell by 7.4% from August.
While volatility in global energy markets continues to pose a risk to price stability, gasoline prices are on a downward trend, which should bring even further relief to inflation numbers in October.
The Bank of Canada will continue to monitor geopolitical conditions and its effect on global oil prices, but no further rate hikes are expected.
Call us at 1 855 363 3526 or fill out the form below and we'll contact you to discuss your specific situation.
This article was written by Tu Nguyen and originally appeared on 2023-10-17 RSM Canada, and is available online at https://realeconomy.rsmus.com/canadas-inflation-had-broad-based-deceleration-in-september/.
RSM Canada Alliance provides its members with access to resources of RSM Canada Operations ULC, RSM Canada LLP and certain of their affiliates (“RSM Canada”). RSM Canada Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM Canada. RSM Canada LLP is the Canadian member firm of RSM International, a global network of independent audit, tax and consulting firms. Members of RSM Canada Alliance have access to RSM International resources through RSM Canada but are not member firms of RSM International. Visit rsmcanada.com/aboutus for more information regarding RSM Canada and RSM International. The RSM trademark is used under license by RSM Canada. RSM Canada Alliance products and services are proprietary to RSM Canada.
FCR a proud member of RSM Canada Alliance, a premier affiliation of independent accounting and consulting firms across North America. RSM Canada Alliance provides our firm with access to resources of RSM, the leading provider of audit, tax and consulting services focused on the middle market. RSM Canada LLP is a licensed CPA firm and the Canadian member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM Canada Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.
For more information on how FCR can assist you, please call us at 1 855 363 3526