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Bank of Canada Governor left borrowing costs unchanged. But that is cold comfort to millions of Canadians whose wage gains have fallen behind inflation thanks to a softening labour market (Fred Lum/The Globe and Mail/Fred Lum/The Globe and Mail)
Bank of Canada Governor left borrowing costs unchanged. But that is cold comfort to millions of Canadians whose wage gains have fallen behind inflation thanks to a softening labour market (Fred Lum/The Globe and Mail/Fred Lum/The Globe and Mail)

THE LOOKAHEAD

Wages still failing to keep up with inflation Add to ...

With Europe’s crisis clouding global prospects, most central bankers have bigger worries these days than whether the commodity-fuelled inflation of recent months is cooling quickly enough.

Bank of Canada Governor Mark Carney has stressed that in shaky times, his mandate gives him flexibility to take longer than usual to bring inflation back to his 2-per-cent target. On Dec. 6, when he left borrowing costs unchanged for a 10th straight decision, he said “reduced pressures from food and energy and ongoing excess supply in the economy” would slow inflation.

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But that is cold comfort to the millions of Canadians whose wage gains have fallen behind inflation thanks to a softening labour market. Here’s a breakdown of what to expect when Statistics Canada releases its latest inflation data, for November, this Tuesday in Ottawa:

Total versus core

So-called headline inflation, which has been above 2 per cent for several months, will slow to a 2.8-per cent annual clip from October’s 2.9-per-cent pace, economists say. At the same time, the “core” rate, which strips out volatile items such as energy and certain fresh foods, is expected to accelerate from the current 2.1 per cent to as much as 2.3 per cent, the fastest since 2008.

Electronics, housing

The floods in Thailand last month pushed up global prices for hard drives and specialized electronic parts, economists at CIBC World Markets noted on Friday. This will likely make computers and other high-tech products more expensive at the retail level. Also, prices for new homes rose in the month, and another factor boosting core inflation is the fact that not all foods are excluded.

Energy, food

The price of gasoline at filling stations eased last month, and while food and energy costs are still higher than many households can handle without cutting back on other items, both have stabilized after the spikes seen in the spring and summer. A report last week from the University of Guelph indicates that as competition increases among grocery chains, retail food prices won’t rise more than 2 per cent next year, which is less than half of the pace of food inflation in the past five months.

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