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Inflation up 0.7% from December, as cellphone and restaurant bills rise

The price of telephone services rebounded in January after many of Canada's major wireless offered discounted data plan in December.
The price of telephone services rebounded in January after many of Canada's major wireless offered discounted data plan in December. File Photo / Getty Images

The rate of inflation rose to 1.7 per cent in January, compared to the same month last year, and 0.7 per cent compared to December, Statistics Canada said on Friday. The annual pace of inflation was slower than the 1.9 per cent recorded at the end of last year, but the numbers suggest consumer prices in Canada are on an upward trend.

Cellphone and restaurant bills, in particular, delivered a powerful squeeze to Canadians’ wallets last month.

“Telephone services posted the strongest monthly increase since 1981, rebounding after aggressive wireless discounting in December,” BMO economist Robert Kavcic wrote in a note to clients.

December saw Rogers, Fido, Kodoo, Bell and Virgin offer 10 gigabytes of data for $60 per month, promotions that were largely seen as a response to Shaw’s Freedom Mobile, which started offering 10GB for $50 in October. (The Shaw family controls both Shaw Communications and Corus Entertainment, the parent company of Global News.)

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READ MORE: Wireless carriers can’t keep up after weekend 10 GB for $60 promotion

Menu prices, meanwhile, saw the second-largest monthly increase in nearly 30 years.

“If you were to think that was the result of Ontario’s minimum wage, you’d be correct. Indeed, Ontario restaurant prices jumped 1.9 per cent in the month [in not seasonally adjusted terms], by far the most in Canada, and an entirely predictable response,” Kavcic wrote.

The province upped its pay floor from $11.60 per hour to $14 per hour on Jan. 1.

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But the increase in menu prices also reflects a broader trend that predates Ontario’s minimum wage hike. The price of food bought in restaurants climbed steadily in 2017, even when that of groceries fell. Experts have suggested this is because Canadians are increasingly opting for prepared meals over home cooking.

WATCH: Global News has estimated how much a week of groceries costs for a family of four

$220 per week: That’s the cost of groceries for an average Canadian family
$220 per week: That’s the cost of groceries for an average Canadian family

On the flip side, StatCan said the main downward forces on inflation last month were due to cheaper prices for video and digital equipment, electricity and travel tours.

Still, the average of three measures of core inflation, designed to filter out the noise of more-volatile items like gasoline, advanced once again in January to hit 1.8 per cent – its highest mark since September 2016. Average core inflation has been on a steady monthly climb since May 2017, a move that suggests underlying consumer prices have been moving higher due to Canada’s recent economic strength.

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READ MORE: How much does a week of groceries cost in Canada? We crunched the numbers

The core measures are closely watched by the inflation-targeting Bank of Canada and the reading likely reinforces expectations it will continue hiking its trendsetting interest rate.

However, the latest inflation reading did not seem to prompt economists to change their forecasts on the next interest rate hike, which many expect in April or later.

“Today’s inflation readings are somewhat stronger than expected. This doesn’t change our forecast that the Bank of Canada will be patient in terms of rate hikes, ” CIBC economist Royce Mendes wrote in a research note. “Indeed, the economy is still facing a number of potential headwinds, including NAFTA renegotiations, U.S. tax cuts and new mortgage rules.”

– With files from the Canadian Press