Canada’s annual inflation rate remained steady in November, with grocery prices experiencing their highest increase in almost two years, according to Statistics Canada. The overall inflation rate stood at 2.2 percent, while food prices surged by 4.7 percent compared to the previous year, marking the largest spike in grocery price growth since December 2023.
The rise in food costs was primarily driven by fresh fruit, particularly more expensive berries, and “other food preparations,” which mainly consist of processed foods. Coffee prices soared by 27.8 percent year-over-year in November, attributed to adverse weather conditions in coffee-growing regions and U.S. tariffs. Furthermore, fresh and frozen beef prices climbed by 17.7 percent last month, partly due to diminishing cattle inventories in North America.
RBC senior economist Claire Fan highlighted that the surge in food inflation was caused by supply constraints, including severe weather conditions. She also noted that while Canadian importers are not directly affected by tariffs, prices in Canada could still be impacted by U.S. exporters passing on cost increases along food manufacturing supply chains.
Meanwhile, the core inflation rate moderated in November, with prices for services growing at a slower pace. The drop in year-over-year prices for travel tours and accommodations was mainly due to a base-year effect, as Toronto experienced heightened tourism spending during Taylor Swift’s concert series at Rogers Centre the previous year. Rent prices also increased at a slower rate in November compared to October.
Despite the slowdown in service inflation, cellular service prices saw a notable increase of 12.7 percent in November, partly due to fewer promotions compared to the previous year. The Bank of Canada’s core inflation measures, excluding volatile components like food and gas, either eased or remained stagnant in November, indicating that significant interest rate hikes are not imminent.
Fan emphasized that while the economy has shown signs of improvement, further cuts to the overnight rate are unlikely, as the Bank of Canada signaled a pause in rate reductions.