Canada’s annual inflation rate held steady in November, but the cost of groceries surged to its highest level in almost two years, according to Statistics Canada. The overall inflation rate remained at 2.2 percent, with food prices leading the way by increasing 4.7 percent compared to the previous year, marking the largest jump in grocery prices since December 2023.
The spike in grocery prices was primarily driven by the soaring costs of fresh fruits, particularly berries, and other processed food items. Coffee prices continued to rise sharply, climbing 27.8 percent year-over-year in November due to adverse weather conditions in coffee-growing regions and U.S. tariffs.
Furthermore, prices for fresh and frozen beef surged by 17.7 percent last month, contributing to inflation as cattle inventories decreased across North America. RBC senior economist Claire Fan attributed the rise in food prices to a combination of factors, including supply chain constraints and severe weather conditions.
Despite Canadian importers not directly facing tariffs, they could still feel the impact of cost hikes from U.S. exporters passing on tariff-related expenses along the food manufacturing supply chain, as explained by Fan.
In other sectors, the Bank of Canada’s core inflation moderated in November, with slower growth in service prices, particularly in travel tours and accommodations. Rent prices also increased at a slower pace compared to the previous month, rising 4.7 percent annually in November.
However, the decline in service inflation was offset by higher prices for cellular services, which rose by 12.7 percent in November. The Bank of Canada’s preferred measures of core inflation, excluding volatile components like food and gas, either eased or remained stable in November, indicating no immediate need for interest rate hikes.
Fan suggested that while the economy has shown signs of improvement, further rate cuts are unlikely, and the Bank of Canada has signaled a pause in rate reductions for the time being.