Canada's inflation rates displayed signs of cooling as 2024 came to a close, yet regional disparities remain marked. According to Statistics Canada, the overall Consumer Price Index (CPI) for December 2024 recorded an annual rate of 1.8%, slightly down from 1.9% the previous month. While this decline offers some relief, Alberta continued to grapple with one of the highest inflation rates across the nation, sitting at 2.5%.
Statistics Canada reported the CPI reflects various commodities such as food, shelter, clothing, transportation, education, and alcohol. The continued tax break from the federal government on goods like restaurant food and alcohol postulated to have contributed significantly to this dip starting on December 14, allowing consumers temporary relief, particularly through January.
Alberta's inflation, which now stands second behind British Columbia's rate of 2.6%, shows how different the economic landscapes can be across provinces. Consumer prices within Canada’s largest cities varied as well, with Vancouver reaching 3.2%, Edmonton recording 2.7%, and Calgary at 2.4%. It’s noteworthy how Calgary’s inflation rate experienced a decrease from 3% in November yet remained elevated.
On balancing these dynamics, BMO chief economist Douglas Porter commented on the influences of the temporary sales tax holiday saying, “There were many moving parts last month, but the biggest was the sales tax holiday, which carved certain items heavily.” The food purchased at restaurants and alcoholic beverages purchased at stores were pointed out as specific areas where prices dropped markedly.
With inflation on the radar, consumers found some solace as grocery prices saw a deceleration, noticeably diminishing from 2.6% to 1.9% year-over-year. Despite these comforts, other constituents, such as housing costs, continued to weigh heavily on Canadians, with rental prices reported down to 7.1% year-over-year, though still accelerating at 4.5% from the consumer price index.
Looking at the broader economic picture, the federal government’s GST/HST holiday was pivotal as it reportedly helped lower the annual inflation rate more than otherwise expected. The presence of this tax break, which will continue affecting the coming months’ data, appears to help counterbalance anticipated tariffs, indicated by U.S. President Donald Trump’s potential trade repercussions set to commence February 1.
The Bank of Canada’s response to inflation will likely hinge on upcoming and prevailing economic data. Following the December rate cut by half-a-percentage point, anticipation surrounds whether the central bank will respond similarly again. It appears consensus among analysts strongly leans toward another 0.25% cut at the Bank’s meeting scheduled for January 29.
Desjardins’ Randall Bartlett explicitly noted,