MNI Analysis:Canada CPI Slows to 1.4% Y/Y, Ex Gas CPI Higher>

By Yali N'Diaye

     OTTAWA (MNI) - Canadian inflation slowed to 1.4% in October from 

1.6% in September on a year-over-year basis, with as a slowdown in 

gasoline prices as the main downward contributor, data from Statistics 

Canada showed Friday. 

     The October reading, including a 0.1% monthly increase, was in line 

with analysts' expectations in a MNI survey. 

     The Bank of Canada's core readings of inflation went in three 

directions in October month, but the range itself ticked down to 

1.5%-1.7% year-over-year in October from 1.5%-1.8% in September. 

     Still, CPI-common, which tracks common price changes across 

categories, went up to 1.6% from 1.5%, confirming the upward trend since 

the beginning of this year, when it started at 1.3%. 

     On the other hand, CPI-median, reflecting the price change located 

at the 50th percentile, edged down to 1.7% from 1.8%. 

     Meanwhile, CPI-trim, which excludes components whose rates of 

change are located in the tails of the distribution, was unchanged at 

1.5% for the third consecutive month. 

     The 1.4% year-over-year total CPI gain was a slowdown from 

September's 1.6% increase, but should not surprise the Bank of Canada, 

which expects fourth quarter CPI to average 1.4% and not reach the 2% 

target before the second half of next year. 

     Gasoline prices were a key downward contributor, as they decreased 

3.2% on the month, bringing down the 12-month rate to 6.5% from 14.1% in 

September. 

     Excluding gasoline, prices rose 0.2% on the month, and 

year-over-year CPI actually accelerated to 1.3% from 1.1%. 

     Energy prices were down 1.8% on the month and up 1.0% on the year, 

and food prices fell 0.5% on the month for a 1.3% 12-month gain. 

     Excluding food and energy, prices rose 0.3% on the month and 1.4% 

year-over-year. 

     While food prices, which were down 0.5% in October from September, 

have been putting downward pressure on inflation, the BOC expects such 

pressure to "completely dissipate" by the beginning of next year. 

     Overall, 5 of the 8 major components were up on the month, 

including a 1.5% gain in clothing and footwear, which, however, was the 

only component to post a decrease (-1.5%) year-over-year. 

     Shelter (+1.2% year-over-year) and transportation (+3.0%) were the 

two largest contributors to the increase, although slower gas price 

gains translated into a slower growth of transportation prices as well, 

which were up 3.8% year-over-year in September. 

     Regionally, prices rose at a slower 12-month pace in five provinces 

and rose at a steady pace in four provinces. 

     On a seasonally adjusted basis, total CPI rose 0.2% in October, the 

same monthly pace as September. Excluding food and energy, CPI was also 

up 0.2% after being flat in September. 

     "Inflation remains tame, a reason for the Bank of Canada to wait 

until the spring for another rate hike," CIBC economist Nick Exarhos 

wrote in a commentary. 

     --MNI Ottawa Bureau; email: yali.ndiaye@marketnews.com 

     [TOPICS: MACDS$,M$C$$$]