As reported in Financial
Post, Statistics Canada said that core inflation rose from 1.5% to 1.8% in October
while consumer prices saw an increase in the same month, standing at 2.4%, a
2-year high. Both numbers were higher than anticipated. According to Toronto-Dominion
Bank’s chief economist Craig Alexander, this was not an indication of an
upcoming inflation problem and added that they still maintained their
expectation that the Bank of Canada will hold off interest rate hikes until
2011 July. This is good news for people who have taken out variable rate
mortgage, home
equity loan or second mortgage, and are going to be hit by the increase in
interest rates.
Mr. Alexander said that this registered increase in
inflation is unlikely to persist. He cited the slow pace of economic growth
globally and subsequent stabilization in energy prices as reasons why a future
inflation uptick may not be on the cards. He mentioned modest consumer spending
and the relaxing auto prices and sales as other reasons that point to an
improbable inflation uptick.
VP of Scotia Capital Derek Holt said that the inflation rise
registered in October focused on 3 areas (a) transportation costs (b) shelter
costs (c) apparel costs. Another major contributor to the increase was the
energy cost. Owing to 8.8% higher gasoline prices, an 8.1% spike in electricity
cost and 10.6% higher natural gas prices, the overall energy costs paid by
consumers rose by 9.1% over last year’s figure. The only industry where a price
fall in October was registered was footwear and clothing, which recorded a 0.1%
drop.
