OTTAWA — Canada’s annual inflation rate edged down slightly to 6.8 per cent in November, but that’s little relief for Canadians who are facing rapidly rising grocery and shelter costs.
In its latest consumer price index report released Wednesday, Statistics Canada said slower price growth for gasoline and furniture last month was offset by rapidly rising shelter costs and stubbornly high grocery prices.
Grocery prices climbed at a faster annual rate in November. The federal agency said prices rose 11.4 per cent annually, up from 11 per cent in October.
“There was some progress being made to slow inflation down, but not as much as I think anyone would have liked to have seen,” said Royce Mendes, head of macro strategy at Desjardins Capital Markets.
Although economists have been encouraged by developments in recent months, Canadians facing pressures for essentials like food and shelter. Those pressures are particularly painful for lower-income Canadians, Royce said.
The rise in shelter costs is attributed to higher mortgage interest costs and rising rent. Mortgage interest costs were 14.5 per cent higher in November on an annual basis, while rent was up 5.9 per cent.
Statistics Canada said upward pressure is being placed on rent prices as more Canadians are priced out of home ownership because of high interest rates.
Excluding food and energy, prices were up 5.4 per cent on a yearly basis.
In a client note, BMO chief economist Douglas Porter said core inflation edging up is a clear sign of persistent underlying inflation pressures.
“Turning the temperature down on inflation is proving to be an achingly slow process, and we suspect this may be a theme for 2023,” Porter said.
November’s consumer price index report compares with an annual inflation rate of 6.9 per cent in October and September. Inflation peaked in July at 8.1 per cent and has slowed since then.
The Bank of Canada has raised interest rates rapidly this year to cool decades-high inflation and slow spending in the economy.
Economists expect Canadians facing higher shelter costs because of high interest rates to pull back on other spending. That process is expected to slow inflation.
Royce said Canadians have only seen the “tip of the iceberg” when it comes to the effect of rate hikes on the economy and inflation.
“The deceleration in inflation has really come as a result of supply chain disruptions, easing and energy prices falling, not as a result of the Bank of Canada’s interest rate increases,” he said.
Economists say it can take between 12 and 18 months for rate hikes to take full effect on the economy.
Earlier this month, the central bank raised its key interest rate for the seventh consecutive time this year, bringing it to 4.25 per cent.
It also signaled it’s open to pressing pause on the rate hikes, depending on how the economy evolves.
However, Porter is doubtful the Bank of Canada is ready to stop its aggressive rate hike cycle and expects it to hike rates again in January.
“This firm report does nothing to doubt that call,” he wrote.
This report by The Canadian Press was first published Dec. 21, 2022.
Nojoud Al Mallees, The Canadian Press