Today's Report (11/17/2021)

The Consumer Price Index (CPI) rose 4.7% on a year-over-year basis in October, up from a 4.4% increase in September. This was the largest gain since February 2003. Excluding energy, the CPI rose 3.3% year over year, matching the increase in September.

On a monthly basis, the CPI rose 0.7% in October, the largest gain since June 2020 (+0.8%), when energy prices began to recover following steep declines during the early months of the pandemic. On a seasonally adjusted monthly basis, the CPI rose 0.5%.

Prices rose in all eight major components on a year-over-year basis in October, with transportation prices (+10.1%)contributing the most to the growth in the all-items index. This was the highest increase for this component since march 2003. The increase in consumer prices for transportation was primarily driven by a rise in energy prices(+25.5%).

Market Reaction

Following the Canadian CPI release, the CAD weakened.

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.