Canada’s inflation rate slowed to 5.9 per cent in January, Statistics Canada said on Tuesday.
That number was lower than the 6.2 per cent that economists were expecting. However, the price of groceries continued to accelerate at a faster pace than in December, the statistics agency reported.
Mortgage interest costs continued to rise, clocking in at 21.2 per cent in January as the Bank of Canada tries to tame inflation with high interest rates. It marks the largest increase since September 1982.
Given much of the acceleration in inflation that happened in the first half of 2022, the federal agency says headline inflation will continue to slow because of base-year effects.
A base-year effect refers to the impact of price movements from a year ago on the calculation of the year-over-year inflation rate.
The last time Canada’s annual inflation rate was below six per cent was in February 2022, when it was 5.7 per cent.
January’s numbers marked “a rare downside surprise,” and a step in the right direction, said Doug Porter, a chief economist at Bank of Montreal.
“While there were some one-off factors helping out, there were also numerous special factors on the way up last year — so we were due for some better inflation luck, with a cooling economy and improved supply chains also contributing,” Porter said.
The decrease came just under a month after the central bank announced that it would press pause on additional interest rate hikes. During that January meeting, it raised the benchmark interest rate to 4.5 per cent, the eighth increase in less than a year.
“This milder report will provide the [Bank of Canada] with some comfort on their decision to move to a conditional pause, acting as a strong antidote to the run of robust growth figures seen in recent weeks,” Porter said.
No slowdown in cost of groceries
Meanwhile, grocery prices rose faster last month, with prices up 11.4 per cent compared to a year ago. The federal agency said prices for meat, bakery goods and vegetables all rose faster.
“It’s like everything is being doubled in price,” Leon Brown said outside of a No Frills grocery store in Toronto. “Almost every time I come back, there’s another addition to the price.”
Fresh and frozen chicken was especially pricey, rising nine per cent from December — an increase that Statistics Canada attributed to seasonal demand, supply issues and the impact of avian flu.
The cost of dining out also rose at a faster pace as fast food and takeout became more expensive.
“You want to go out to eat,” Brown said. “They expect you to tip; the price has gone up there. So it makes it hard for everything.”
On a monthly basis, higher gas prices in January drove up the consumer price index compared with December. The federal agency said the consumer price index rose 0.5 per cent in January after declining by 0.6 per cent a month prior.
Meanwhile, consumers paid less for cellular services in January compared to a year ago as Boxing Day deals extended into last month.
The prices for passenger vehicles also slowed down on a yearly basis, partially reflecting base-year effects, given the availability of vehicles was impacted by supply chain problems a year ago.