This article originally appeared in the Financial Post. Below is an excerpt from the article.
By Philip Cross, October 19, 2023
The Canadian economy continues to perform better than expected, with Statistics Canada reporting an outsized employment gain for September. Propelled by a similar result in the U.S., bond yields reached their highest levels in over a decade as markets clearly expect both inflation and interest rates to remain higher for longer.
As measured by the consumer price index, Canadian inflation has accelerated from its recent low of 2.8 per cent in June back up to 3.8 per cent in September. The upturn was widely expected because of “base-year effects”: the drop in gasoline prices last summer is being replaced in the index by this summer’s higher prices.
But what’s pushing driving inflation is more than energy prices. Measures of “core” inflation that don’t include energy prices remained stubbornly near four per cent even as lower gasoline prices pulled down headline inflation. The cost of services rose 3.9 per cent in September, led by a surge for renters as Canada’s housing shortage worsened. Meanwhile, wage increases accelerated to 5.0 per cent in the latest jobs report.