Canadian inflation rises in December as fruit and vegetable prices surge

Canada’s December inflation rate was the fastest in a year, led by double-digit gains for fruit and veggies along with a reduced drag from gasoline prices.

The consumer price index rose 1.6 per cent in December from a year ago following a rate of just one.4 percent the last month, Statistics Canada said Friday from Ottawa. The core rate that excludes eight volatile products slowed to at least one.9 per cent from 2 per cent within the prior month, the slowest pace since July 2014. Economists surveyed by Bloomberg forecast the entire rate would advance 1.7 per cent and core by 2 per cent.

Fresh vegetable and fruit costs rose 13 per cent in December from the year earlier, pushing up overall food costs by 3.7 percent. Gasoline price declines slowed to 4.8 per cent from 10.6 per cent in November, and automobile prices rose 3.1 per cent.

Price gains have lagged the Bank of Canada’s 2 per cent target for over a year on cheaper gasoline and slack in the economy holding down increases for other goods. Governor Stephen Poloz on Wednesday kept his key lending rate at 0.5 per cent, saying a recovery from the commodity price crash will return inflation to target round the end of the coming year.

Measures of core inflation that diminish or exclude the most volatile items have been boosted to around 2 per cent through the falling Canadian dollar that makes imports costlier, the central bank said now. The so-called currency pass-through was as high as 0.7 percentage points in the fourth quarter through the bank’s estimate.

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Cutting interest rates again might have extended the Canadian dollar’s rapid slide and led to instant inflation, Poloz told reporters Wednesday, area of the reason he explained he shifted from an earlier bias to cut interest rates.

Canadians have seen some sticker shock for just one imported good. Cauliflower prices jumped to $7 a head in certain Canadian cities this month, sparking a wave of online discussions and news stories. Canada imports most of its fresh fruits and vegetables in the U.S. or Latin America during its winter months.

Statistics Canada doesn’t publish the load cauliflower carries in the consumer inflation basket, and the entire “other fresh vegetables” category it belongs to includes a weight of 0.7 percentage points.

On a regular monthly basis, total inflation fell 0.5 percent in December and also the core rate decline by 0.4 per cent. Economists surveyed by Bloomberg predicted that overall monthly prices would fall 0.4 percent and also the core rate would fall 0.3 per cent.

Seasonally adjusted inflation rose 0.1 % in December, both for overall prices and for the core basket of goods.

– With the help of Erik Hertzberg in Ottawa.

Bloomberg News