It's all about the lettuce

Statistics Canada reported this morning that Canada's headline consumer price index (CPI) rose 0.7 percent year-on-year in October, up from 0.5 percent in September. The increase was mainly attributable to higher prices for food, notably lettuce, up more than 25 percent as a result of supply issues, and fresh meat, particularly chicken. The increase was significantly above the analysts' consensus expectation, which called for an increase of 0.4 percent.

Excluding gasoline, which remains more than 10 percent lower in price than a year ago, the annual increase in CPI was 1.0 percent, the same as in September.  The Bank of Canada's three preferred measures of core inflation also show a rate significantly above the headline, averaging an increase of just below 1.8 percent for October, up from 1.7 percent in September. Since the COVID pandemic began, these measures have been receiving even less attention than they did previously. In any case, there is nothing in today's data to suggest any change in the Bank's policy stance. Now Governor Tiff Macklem has indicated that the Bank wants to see CPI consistently above the 2 percent target before it considers tightening policy, which means rates are likely to remain on hold for a long time to come.

As promised last month, the Bank has now provided Canadians with an early Christmas gift: a Personal Inflation Calculator for people to figure out their own inflation experience, based on their personal spending patterns.  It is simple enough to use, though it is doubtful that most people will have to hand the data they need to use it accurately. 

As an experiment, I entered some very rough estimates of my own household spending patterns into the calculator. The results suggested that my personal rate of inflation pre-pandemic was slightly lower than the headline figure, which makes sense, given that I neither pay rent nor have a mortgage. Ever since the pandemic began, however, my rate has been consistently above the headline figure. Anecdotal evidence suggests that this is most Canadians' perception of the underlying inflation picture. We can confidently expect that plenty of journalists are running various scenarios through the calculator even as we speak. It will be interesting to see how they use and interpret the results in the weeks and months ahead.