Forecasters say Canadians saw little relief from inflation in October

Inflation has been heading lower in recent months, but Canadians likely haven’t noticed as gas prices went up and grocery costs continued to soar last month.

Statistics Canada is expected to release its October report on the consumer price index on Nov. 16, and economists are warning Canada’s annual inflation rate likely ticked higher.

BMO is forecasting the annual inflation rate was 7.2 per cent, up from 6.9 per cent in September, while RBC also expects inflation rose slightly, estimating 7.0 per cent.

Forecasters say gas prices and food inflation are to blame for the expected uptick. However, the slight bump might not mean much in the long run.

“As long as energy prices don’t persistently push higher, the expectation is inflation will back off,” said Benjamin Reitzes, BMO’s managing director for Canadian rates and macro-strategist.

Economists have been encouraged by some early signs that core inflation — which is less volatile than the headline number — is slowing. The headline rate has also fallen in recent months after peaking at 8.1 per cent in June.

Forecasting is far from an easy task in the current economy, however. With the Canadian labour market still strong and grocery prices on an upward tear, Reitzes said “there’s a chance we’re wrong.”

The rapidly rising cost of food in particular has caught the attention of Canadians, policymakers and economists. Grocery prices in September rose at the fastest pace since 1981, with prices up 11.4 per cent compared with a year ago.

The labour market has also held up remarkably well. Statistics Canada’s most recent labour force survey showed the economy added 108,000 jobs in October.

The strong job numbers took people by surprise and came after four months of losses or little growth in employment. It also poured cold water on the idea that the labour market is showing signs of a slowdown.

The Bank of Canada has indicated that higher interest rates are still necessary to cool inflation.