Today's Report (12/15/2021)

Canadians continued to feel the impact of supply chain disruptions in November, which put upward pressure on prices for durable goods, like passenger vehicles and furniture. Prices for foods commonly seen around dinner tables, including vegetables, meat, and pasta, have also increased recently compared with 2020.

Towards the latter half of the month, the impact of the floods in British Columbia and the spread of the Omicron COVID-19 variant created new uncertainties around further potential disruptions to supply chains and oil demand.

The Consumer Price Index (CPI) rose 4.7% on a year-over-year basis in November, matching the increase in October. Excluding gasoline, the CPI rose 3.6% year over year, also matching the gain in October.

On a monthly basis, the CPI edged up 0.2% in November, following a 0.7% increase in October. On a seasonally adjusted monthly basis, the CPI increased 0.3%.

Year over year, prices for goods (+6.9%) rose at a faster pace in November compared with October (+6.5%). Prices for services (+2.9%), however, grew at a slower pace than in October (+3.2%), moderating the price growth in the CPI. Declines in prices for cellular services (-17.9%) contributed to the slowdown in the increase in service prices.

Market Reaction

Following the release which was slightly delayed the CAD weakened (chart showing USD strengthening against the CAD).

What Is It?

It measures the changes in the price of goods and services and is viewed as the best measure of the underlying inflation rate by most economists.

What Is The Fundamental Effect?

The Central Bank pays close attention to the figure as its role of maintaining price stability. If goods and services increase over time but the income of consumers do not, consumers will have weaker buying power since the value of their money decreases in comparison.

What Effect Does It Have On The Market?

CURRENCY - Because Canada imports a lot, prices for many goods rise when Canada experiences inflation.

STOCKS - Inflation may actually help equity investors by supporting rising stock prices. However higher prices for goods may lead consumers to forgo some purchases as prices rise, and budgets are constrained. This can harm profits and drive prices lower.

BONDS- As inflation grows, bond investors suffer when their borrowers pay them back in a currency that becomes worthless over time.

Canadian Core CPI

This excludes the unstable components, food, and energy.