OTTAWA — The annual pace of inflation cooled in October as the cost of gasoline came back down after spiking higher in September when hurricane Harvey forced the shutdown of oil refineries in Texas.
Statistics Canada said Friday the consumer price index was up 1.4 per cent in October compared with a year ago, following a 1.6 per cent increase in September.
The cost of gasoline was up 6.5 per cent year-over-year in October, compared with a 14.1 per cent year-over-year increase in September. On a month-over-month basis, the cost of gasoline fell 3.2 per cent.
Excluding gasoline, the index was up 1.3 per cent compared with a year ago — more than the 1.1 per cent increase in September.
However, CIBC economist Nick Exarhos noted that the recent strength in oil prices will reverse the slide in energy prices.
"There's evidence that the recent rebound in crude prices will more than reverse that slippage, and base effects will likely ensure that energy will be a positive contributor to the overall inflation rate from here through most of next year," he said.
Prices were up in seven of the eight major categories compared with a year ago with the transportation and shelter categories contributing the most to the overall increase.
Transportation prices were up 3.0 per cent compared with a year ago following a 3.8 per cent increase in September, while shelter costs were up 1.2 per cent.
Food costs were up 1.3 per cent as food bought in restaurants gained 2.9 per cent, while food from stores rose 0.6 per cent compared with a year ago.
Prices for clothing and footwear, the only category to move lower, fell 1.5 per cent compared with a year ago as the cost of women's clothing fell 4.6 per cent compared with a year ago.
Of the Bank of Canada's three preferred measures of core inflation, which seek to look through the noise of more-volatile items, CPI-common increased to 1.6 per cent compared with 1.5 per cent in September, while CPI-median slipped to 1.7 per cent from 1.8 per cent. CPI-trim held steady at 1.5 per cent.
David Madani, senior Canadian economist at Capital Economics, said with one core measure up, one down and one with no change, he thinks there's still significant slack in the economy.
"My expectation going forward is that we'll just continue to see the core inflation measures remain below the two per cent market," said Madani, who expects growth in the economy to slow next year.
The Bank of Canada, which a uses a two per cent inflation target in setting monetary policy, raised its key interest rate target twice this year following strong economic growth to start 2017.
However, economists expect growth for the second half of the year to come in at a slower pace and the central bank has suggested that while further rate hikes are likely, they will be cautious and pay close attention to the incoming economic data.
"For the Bank of Canada, the reality of still-stable inflation provides them with the luxury of time before having to move again on interest rates, allowing them some room to assess the impact of the OSFI rule changes and how NAFTA is progressing," Bank of Montreal chief economist Doug Porter wrote in a report.
"We continue to expect the bank to wait until at least the March meeting before hiking next."
Craig Wong, The Canadian Press