Consumer Price Index Edges Higher to Close out 2023

The Consumer Price Index (CPI) rose 3.4% on a year-over-year basis in December, following a 3.1% increase in November. While gasoline prices fell monthly for the fourth month in a row, the headline acceleration was largely the result of higher year-over-year prices for gasoline in December (+1.4%) compared with November (-7.7%). This was the result of a base-year effect where gasoline prices fell more monthly in December 2022 than they did in December 2023. Excluding gasoline, the headline CPI slowed year over year, from 3.6% in November to 3.5% in December.

Additional acceleration came from airfares, fuel oil, passenger vehicles and rent. Prices for food purchased from stores rose 4.7% year over year in December, matching the increase in November (+4.7%). Moderating the acceleration in the all-items CPI were lower prices for travel tours.

Every month, the CPI fell 0.3% in December, after a 0.1% gain in November. Lower month-over-month price movements for travel tours (-18.2%) and gasoline (-4.4%) contributed to the monthly decline. On a seasonally adjusted monthly basis, the CPI rose 0.3% in December.

Chart 1 
12-month change in the Consumer Price Index (CPI) and CPI excluding gasoline

Chart 2 
Headline acceleration led by the transportation component

Gasoline prices increase on base-year effect

Year over year, gasoline prices rose 1.4% in December, following a 7.7% decline in November. The increase was the result of a base-year effect, as prices fell 13.1% month over month in December 2022, when prices for crude oil were lower amid concerns of a slowing global economy.

Monthly, gasoline prices (-4.4%) fell for the fourth consecutive month in December. Continued uncertainty about oil demand and high supply levels put downward pressure on prices.

Chart 3 
Gasoline prices fall for the fourth consecutive month

Prices for air transportation rise month over month amid strong demand for air travel

Month over month, Canadians paid 31.1% more for air transportation in December amid strong demand for air travel during the holiday season, following a 1.1% gain in November. Prices for air transportation fell to a lesser extent on a year-over-year basis in December (-9.7%) compared with November (-17.4%), putting upward pressure on the all-items CPI.

Rent prices continue to climb

Rent prices continued to climb in December, rising 7.7% year over year, following a 7.4% increase in November. Among other factors, a higher interest rate environment, which can create barriers to homeownership, puts upward pressure on the index. While rent prices remained elevated on a year-over-year basis in most provinces in December, prices in Ontario (+6.9%), British Columbia (+8.6%) and Quebec (+6.8%) contributed the most to the increase.

Rent prices in Prince Edward Island (-0.9%) fell year over year for the fifth consecutive month in December.

Chart 4 
Rent prices remain elevated

Passenger vehicle prices rise

The purchase of passenger vehicles index rose 2.3% on a year-over-year basis in December, following a 1.5% increase in November. The increase was led by higher prices for new passenger vehicles (+3.4%), partly attributable to the availability of new 2024 model-year vehicles.

Regional highlights

Year over year, prices rose faster in December compared with November in nine provinces. Prices for fuel oil and other fuels fell to a lesser extent in December (-13.0%) compared with November (-23.6%), contributing to the acceleration in all-items inflation. Fuel oil is more commonly used for heating homes in Atlantic Canada, and as such, contributed more to price growth in these provinces compared with others.

Chart 5 
The Consumer Price Index rises at a faster pace in nine provinces