Canadian CPI Exceeded Expectations in November

December 19, 2008

Canadian consumer prices slid 0.3% unadjusted in November but rose 0.5% in seasonally adjusted terms. Seasonally adjusted consumer prices had been unchanged month-on-month in both September and October. On-year CPI inflation fell to 2.0% — at target but not yet below — from 2.6% in October, 3.4% in September, and 3.5% in August. Disinflation was concentrated in gasoline, which plunged 21.4% from October and by 14.4% from November 2007, their greatest on-year drop since September 2006. For operational purposes, the Bank of Canada targets core inflation at 2.0% under the presumption that core and total CPI converge in the long run, and core jumped to an above-target 2.4% on-year from 1.7% in October. The CPI report revealed two higher-than-anticipated price forces. Food prices leaped 1.8% from October and to a 12-month advance of 7.4%, most since November 1986, from 6.1% in the year to October. Non-food consumer prices rose just 0.9% y/y. The other surprise involved motor vehicles, where the new model year gets entered into the CPI data every November. Motor vehicle leasing and buying prices posted a much smaller on-year drop of 2.7% in November than the 9.0% decline in the year to October.



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