Meat and Potatoes: Inflation on Track for 20-year High

Higher food and gas prices continue to eat into the budgets of Canadian consumers, though at least increases at the pump are slowing.

The cost of food in Canada climbed in November by 4.8 per cent compared to a year earlier, the fastest increase since July of 2009, Statistics Canada said today. That's up from the 12-month increase of 4.3 per cent measured in October.

Gas prices increased 13.5 per cent, the statistics agency said, though that was down from October's 18.2 per cent and the slowed increase since the start of the year.

Over all, Canada's annual inflation rate was unchanged last month at 2.9 per cent in November. The so-called core rate, which excludes volatile items and helps guide the Bank of Canada, was also unchanged at 2.1 per cent.

Month over month, consumer prices increased 0.1 per cent from October, and core prices rose at the same pace. Both were slower than October's increases.

But make no mistake: Food and gas costs are still biting, in every province, according to Statistics Canada.

Canada has one of the slowest inflation rates in the world, though that may be little solace when you're at the supermarket.

Over the 12 months, consumers were hit by increases of 5.7 per cent for store-bought food. Vegetable prices rose 13.2 per cent and bread 11.9 per cent. Meat prices climbed 6.2 per cent, and potato costs surged 20.3 per cent. Restaurant prices also rose.

Over all, today's measure was largely expected. The question for many households, though, will be what's ahead given that income gains in Canada have stalled.

"Price increases should cool somewhat in 2012, as food inflation ebbs and energy prices simmer down amid a slowing global economy," said deputy chief economist Douglas Porter of BMO Nesbitt Burns. "However, we would note that at an average rate of nearly 3 per cent this year, 2011 will mark the fastest full-year inflation in Canada in 20 years. Low versus the rest of the world perhaps, but high by recent standards."

As a point of interest, Mr. Porter noted that 1991 was also the year that the Bank of Canada began to target inflation.

Having said that, today's latest inflation reading is not expected to change Bank of Canada Governor Mark Carney's mind on anything.

"While price pressures aren’t easing as fast as the Bank of Canada had anticipated, that won’t change the BoC’s stance on monetary policy for now," said senior economist Krishen Rangasamy at National Bank of Canada.

"There are so many downside risks to the economy and the BoC is likely to play safe and leave monetary policy highly stimulative through next year."

• Food, gas costs fuel inflation

Markets rally

Global stock markets climbed today, buoyed by a better showing in German business confidence, a successful Spanish debt auction and better housing statistics in the United States. South Korean stocks won back some of the ground they lost yesterday after the death of North Korea's Kim Jong Il was disclosed.

South Korea's Kospi climbed 0.9 per cent after losing 3.4 per cent yesterday, while Tokyo's Nikkei rose 0.5 per cent and Kong Hong's Hang Seng 0.1 per cent. In Europe, London's FTSE 100, and Germany's DAX and the Paris CAC 40 were up by between 0.7 per cent and 2.6 per cent.

The S&P 500 (SPX-I1,234.6129.262.43%) and Toronto's S&P/TSX composite (TSX-I11,718.58178.881.55%) followed suit.

"Markets are often easily taken by short term data volatility, and this is one of those mornings," said Derek Holt and Karen Cordes Woods of Scotia Capital.

"A slightly better than expected reading on Germany’s IFO survey of business confidence is being offered up as the reason for this morning’s equity rally. The expectations component has received the most attention and is up from 97.3 to 98.4. Never mind the fact that it is still mired in the lowest readings since July 2009."

Several things are playing into the markets today, and the outlook remains clouded.

"In the binary world of risk on/off, today is off to a good start," said senior currency strategist Camilla Sutton of Scotia Capital.

"Better than expected German data, a successful Spanish bill auction and an interest rate cut at the Riksbank have helped to propel markets; even as there are a slew of negative China articles (China’s real estate bubble may have just popped) and Bill Gross is in the [Financial Times] with ‘the ugly side of ultra-cheap money.’ Accordingly, we expect today’s lift to be short lived and for markets to remain relatively quiet into the holidays."

• Follow our Market Blog
• Spain borrowing costs dive, ECB loans seen at work

TransCanada buys solar projects

TransCanada Corp. (TRP-T43.920.481.10%) is moving deeper into alternative energy.

The Calgary-based company said today it plans to buy nine solar projects in Ontario for about $470-million from Canadian Solar Solutions Inc., which will develop and build the projects.

TransCanada, which noted that it is now the biggest independent power producer in Ontario, will buy each after commercial operation begins by late 2012 and mid-2013.

All of the projects have 20-year buying agreements with the Ontario Power Authority.

• TransCanada buys solar energy projects for $470-million

Bell to cease 'throttling'

After an intense controversy over usage-based billing earlier this year, Canada's BCE Inc. (BCE-T40.790.160.39%) has decided to stop “throttling” Internet traffic on its networks, The Globe and Mail's Rita Trichur reports.

In a joint letter to the Canadian Radio-television and Telecommunications Commission, dated yesterday, regulatory officials at Bell Canada and Bell Aliant indicate the companies will stop implementing the controversial traffic shaping practice in March.

Throttling generally targets peer-to-peer file sharing through sites such as BitTorrent by slowing down speeds of the heaviest users during peak traffic periods.

• Bell to stop 'throttling' Internet traffic

Business ticker

• Deutsche Telekom slams U.S. regulators
• U.S. housing starts hit 1/1/2 year high
• General Mills profit misses estimate

In Economy Lab

Sweden and Norway will share the crown as Europe’s top safe havens in 2012, at least according to Saxo Bank’s annual list of “outrageous” predictions, Naomi Powell reports from Stockholm.

• Is Sweden as safe haven really that 'outrageous'?

In International Business

Yesterday, South Korean equities were the world’s worst performers. Today, they were among the best. Whatever the outlook over the 38th parallel, investors - particularly foreigners - won’t easily take fright. The Financial Times reports.

• South Korea: Dear Investor

In Globe Careers

Done right, an away day can be an opportunity to plan strategy, deal with a variety of issues and build esprit de corps. Done wrong, writes Rhymer Rigby of The Financial Times, it can be a waste of an expensive hotel.

• How to keep a company retreat on the right track