Inflation is likely to be at or slightly above the Bank of Canada's target rate of two per cent in November, economists expected, after Taylor Swift's Eras tour rolled into Toronto and offered a temporary economic boost.
As of Friday, economists on average expected the consumer price index to rise by two percent, according to a Reuters poll. That will be unchanged from the October reading.
However, CIBC senior economist Andrew Grantham says inflation may hold at 2.1 per cent for the month, with some core inflation measures also looking a little stronger.
Then there's the Taylor Swift of it all.
“A lot of the pickup in inflation that we expect in November is going to be due to some temporary factors around the arrival of Taylor Swift within Canada,” Grantham said.
In less than a month, Taylor Swift will be performing six shows in Toronto. According to a non-profit tourism agency, spending related to his show in the city is expected to generate $282 million in economic impact. CBC's Ali Chiasson has more.
He said his concerts, which took place over two weeks in Toronto (Vancouver performances will not be captured in this data), affected the prices of hotels, restaurants and concert tickets.
“If you get a big acceleration in inflation in those areas, that could affect the headline numbers,” he said.
Capital Economics also forecasts a slight increase in inflation, thanks to the global pop star. It forecast headline inflation for November to reach 2.2 percent.
“Based on the 'Taylor Swift effect' seen in hotel and airfare prices in other developed countries, we see core services prices rising 0.7 percent month-on-month,” said Ruben Gargalo Abarques, assistant economist at Capital Economics.
The volatile aspects of inflation—food and energy—were not affected by Swiftonomics.
And energy prices are expected to remain flat in October on a year-over-year basis, Abarques predicts.
Petrol boosted inflation in October
Petrol prices were a major factor in overall inflation jumping to two percent in October, up from 1.6 percent in the previous month.
“Although gasoline prices were largely unchanged in November, they would still result in a seasonally adjusted increase of three percent,” Abarx wrote in a note to clients.
“Energy prices in Alberta rose three per cent month-over-month in tandem with a jump in natural gas prices – pushing the CPI up 0.2 per cent,” Abarx wrote.
RBC economists Nathan Janzen and Claire Fan forecast food inflation to remain steady at around three per cent year-on-year.
Overall, RBC economists forecast inflation to moderate to 1.9 percent in November.
“Canadian consumer price index growth is expected to moderate slightly in November after picking up in October,” they wrote in a note to clients.
Shelter inflation also showed signs of slowing in November, they wrote.
Mortgage interest costs rose 15 percent in October from a year earlier “but that's below the 30 percent growth peak in 2023 and will slow after interest rate cuts,” Fan and Janzen said.
The Bank of Canada continued to lower its key rate earlier this week with a half-percentage point cut, the fifth consecutive rate cut since June as the job market cools significantly and employers cut back on work. The latest move brought its key interest rate down to 3.25 percent.
The federal tax break is expected to temporarily reduce inflation
Going forward, Grantham sees inflation easing in December and January as the federal GST holiday rolls in for the next two months. However, the impact of the tax break will be divided in December as it only came into effect halfway through the month.
Last month, the federal government had announced a 5 percent sales tax waiver on certain products from December 14 to February 15.
“It's just something that's going to make the inflation numbers look weak temporarily and then it's over, the inflation numbers look strong again after fading in February and March,” he predicted.
The Bank of Canada expects the GST holiday to temporarily reduce inflation to around 1.5 per cent in January.
Despite the short-term effects of the GST break, there are longer-term factors in store for inflation in the new year as Donald Trump threatens to add a 25 percent tariff on Canadian goods. If passed, the move would push inflation above the Bank of Canada's target of two per cent.
It's hard to know how the tariffs will affect inflation, but Grantham said it could be “significant.”
“If (a) tariff threat materializes and we retaliate, we will see upward pressure on inflation but it will be a one-time price hike,” he said, adding that it would affect inflation numbers for a year until the tariffs are lifted. exits the calculation and inflation returns to normal levels.
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