Prices going up just in time for Christmas, especially in Ontario
The Bank of Canada released its data on inflation yesterday, and the good news is that inflation is still lower than the breakneck days of 2008 (when spiking oil prices made people temporarily care about saving the planet, and their pocketbooks). The bad news is that inflation has been trending up since last December and is now—just in time for the retail frenzy that is Christmas—getting awfully close to passing the Bank of Canada’s inflation target.
The Globe and Mail reports:
Consumer prices rose 2.4 per cent from a year earlier, Statistics Canada said Tuesday, topping all economists’ forecasts. Less volatile core prices, which the Bank of Canada uses to discern future inflation trends, quickened to 1.8 per cent in October from 1.5 per cent in September.
The surprise increase stems partly from one-off factors – higher sales and property taxes in some provinces, and car insurance hikes in Ontario. But economists will be keeping a close eye in the coming months to gauge whether the economic recovery will gather enough steam to create demand that leads to sustained price increases.
The Bank’s target for inflation is 2 per cent, so the fact that even core inflation is getting close to that might signal that the bank is getting close to raising interest rates again. While they’re a way to control inflation, rate hikes also have the nasty side effect of putting the brakes on a hot housing market—and there’s still no agreement on whether Toronto’s market is bubbly or merely over-warm.
On top of everything, Ontario is already getting hit harder by inflation than the rest of the provinces thanks to the combination of the HST and our arcane system of auto insurance. The only thing Ontarians really have going for us is that if the bank does take away the punch bowl and Canadian real estate goes down the tubes, we won’t be the worst off.
• Inflation rate in October outpaces economic forecasts [Globe and Mail]
• Inflation up, but interest rates to stay for now [National Post]
• Consumers go shopping, inflation reviving [Winnipeg Free Press]
(Image: Kevin Dooley)