Gasoline prices see steepest decline since April 2020: Statistics Canada

Canada’s annual inflation rate rose 6.3 per cent in December, following a 6.8 per cent increase in November, according to the Consumer Price Index report released Tuesday by Statistics Canada.

Excluding food and energy, prices rose 5.3 per cent on a yearly basis in December, following a gain of 5.4 per cent in November, added the federal agency.

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“The headline CPI grew at a slower pace largely due to slower growth in prices for gasoline. Additional deceleration came from homeowners’ replacement cost, fuel oil and other owned accommodation expenses, as well as from various durable goods. Slower price growth was offset by increases in mortgage interest cost, clothing and footwear and personal care supplies and equipment,” it said.

“On a monthly basis, the CPI fell 0.6 per cent in December following a 0.1 per cent gain in November. The monthly decline in December is the largest since April 2020, mostly driven by gasoline prices, which also posted their largest monthly decline since April 2020. On a seasonally adjusted monthly basis, the CPI was down 0.1 per cent in December 2022.”

StatsCan said consumers paid 13.1 per cent less at the pump in December compared with November, the largest monthly decline since April 2020. This reflected lower prices for crude oil amid concerns of a slowing global economy, as well as reduced demand following an increase in COVID-19 cases in China. On a yearly basis, prices for gasoline rose 3.0 per cent in December after a 13.7 per cent increase in November, it said.

“Prices in December rose at a slower pace for a number of food items, including non-alcoholic beverages (+16.6 per cent), bakery products (+13.5 per cent), coffee and tea (+13.2 per cent), other food preparations (+11.5 per cent) and preserved fruit and fruit preparations (+7.2 per cent).

“Slowing price growth for groceries was offset by prices for fresh vegetables, which rose 13.6 per cent in December following an 11.2 per cent increase in November. Accelerated price growth was widespread across vegetables, including tomatoes (+21.9 per cent) and other fresh vegetables (+11.7 per cent) amid unfavourable weather in growing regions.”

Karyne Charbonneau, an economist with CIBC Economics, said 2022 ended with relief at the pump, which helped to cool Canadian CPI inflation.

“The BoC’s (Bank of Canada) core measures CPI-median and CPI-trim also decelerated by one tick to 5.0 per cent and 5.3 per cent respectively, after being revised up in the prior month. While core inflation remains too high, when excluding the increase in mortgage interest costs, which reflect the rapidly rising interest rates, things look better with a monthly gain of about 0.2 per cent. Overall, this report is largely as anticipated and we therefore continue to expect the Bank of Canada to raise rates by 25 bps next week before pausing for the rest of the year.”

Benjamin Reitzes, Managing Director, Cdn Rates & Macro Strategist, with BMO Economics, said headline inflation was soft, as widely expected, due to seasonality and a big drop in gasoline prices.

“Core inflation eased ever-so-slightly, but the slow pace of improvement will bring little comfort to policymakers. Underlying price pressures remain sticky for now. While the direction of inflation is at least mildly encouraging, there’s nothing in this report to keep the Bank of Canada from hiking rates another 25 bps at next week’s policy meeting,” he said.

Nathan Janzen, Assistant Chief Economist with BMO Economics, said one last 25 basis point hike to the overnight rate still looks likely at next week’s BoC policy decision.

“But we continue to expect the end of the current hiking cycle is near. Inflation pressures are still running above the BoC’s target range, but have shown persistent signs off slowing. Global inflation pressures have slowed as commodity prices declined and supply chain disruptions eased. Persistently low unemployment is pushing wages higher and threatening to put a floor under future inflation rates. But softer labour markets in 2023 are likely already baked in as the aggressive interest rate hikes from 2022 filter through to household and business purchasing power/decisions with a lag.”

(Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He worked for 35 years at the Calgary Herald, covering sports, crime, politics, health, faith, city and breaking news, and business. He works as well as a freelance writer for several national publications and as a consultant in communications and media relations/training. Mario was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list)