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Canadian inflation was OK:

Canada’s inflation rate eased in December, thanks largely to a plunge in gasoline prices, in what is an encouraging sign for the Bank of Canada as it mulls further increases in interest rates.

The Consumer Price Index (CPI) rose 6.3 per cent in December from a year earlier, down from a 6.8-per-cent pace in the previous month, according to figures published Tuesday by Statistics Canada. Financial analysts were expecting an inflation rate of 6.4 per cent.

Consumer prices fell 0.6 per cent during the month of December, highlighted by a 13-per-cent plunge for gasoline, its largest decline since the early stages of the COVID-19 pandemic.

Excluding food and energy – two of the more volatile components of CPI – prices rose 5.3 per cent on an annual basis, a slight deceleration from 5.4 per cent in November.
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There were signs of weaker consumption in Tuesday’s report. Price growth for durable goods is slowing quickly. For example, the cost of household appliances fell 4.1 per cent in December, the largest month-over-month decline on record. Furniture price growth is also decelerating.
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At the same time, there are sticky aspects of inflation. Grocery prices rose 11 per cent in December on an annual basis, down from 11.4 per cent in November. Those prices are still growing near the highest rates in several decades, an ongoing frustration for consumers.

Mortgage interest costs have jumped 18 per cent over the past year, on account of the rapid rise in borrowing rates. (Some costs related to housing are declining.) Statscan also noted that prices for personal care supplies – including soap, cosmetics and other products – have risen by 9.9 per cent on an annual basis, the quickest pace of growth in nearly four decades.

The New York Fed’s SCE Household Spending Survey was consistent with all this:

• The median reported year-over-year increase in monthly household spending declined to 7.7 percent in December, down from its series high of 9.0 percent in August 2022. The decrease was broad-based across age, education, and income groups.
• The share of households that reported making a large purchase over the past four months decreased from 61.7 percent in August to 56.4 percent in December. While the share of those making large purchases on home appliances, electronics, and furniture rose in December, the share spending on vehicles, home repairs, homes, and vacations fell.
• The median expected monthly overall spending growth over the next twelve months declined to 4.0 percent from 4.4 percent in August, its lowest reading since April 2021. The decrease was most pronounced for those with household incomes over $100,000.
• The median expected year-ahead change in everyday essential spending (that is, daily living expenses) dropped from 5.6 percent in August to 5.2 percent in December, its lowest reading since April 2021, but above its pre-COVID levels. The median expected change in non-essential spending also declined from 1.8 percent in August to 1.7 percent in December.
• The average reported likelihood of making a large purchase over the next four months increased for home appliances and electronics, but decreased for furniture, home repairs, vacations, vehicles, and homes.

This entry was posted on Tuesday, January 17th, 2023 at 9:04 pm and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.