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Inflation rate ticks up to 2% in December

The cost of living increased at a two per cent annual pace in December, as cheaper energy prices were offset by higher prices for just about everything else.

Higher airfares influenced inflation rate increase in December

A commercial jet plane is showing flying past a sign for gasoline chain Royal Dutch Shell. The price of airline tickets skyrocketed in December, while the price of gasoline declined sharply. (Toby Melville/Reuters)

The cost of living increased at a two per cent annual pace in December, as cheaper energy prices were offset by higher prices for just about everything else.

Statistics Canada reported Friday that the cost of food went up by 2.9 per cent in the past year, while alcohol and tobacco products went up by 4.4 per cent. Shelter costs, meanwhile, increased by 2.2 per cent. 

The price of air transportation, meanwhile, has skyrocketed in the past year — it was up by more than 28 per cent. Although Statistics Canada says it rejigged the way it calculates air transportation costs last March, including more routes than it used to and now looking at prices advertised online as opposed to administrative numbers taken from airlines directly.

As such, "interpretation of the 12-month price change indicator should be made with caution, particularly in the year following the implementation of a new methodology," Statistics Canada cautioned in the fine print of Friday's data release.

Even with that grain of salt, TD Bank economist Brian DePratto says it's clear higher airfares over the holiday season contributed something to that eye-popping jump. "Put it down to holiday travel," he said.

Canada's inflation rate increased to a 2% annual pace in December, but many items saw prices increase or decrease by much more. (Scott Galley/CBC)

Within the food category, fresh vegetables got particularly expensive in the past year, with prices increasing by more than 14 per cent in calendar 2018.

Car insurance premiums also increased, up 5.1 per cent in the past 12 months, the data agency reported.

The biggest reason the overall inflation rate did not go up by even higher was gasoline, the price of which fell by 8.6 per cent in 2018. 

If gasoline is stripped out, the inflation rate would have been 2.5 per cent. The two per cent figure is also stronger than the 1.7 per cent that economists were expecting.

Across the country, the inflation rate increased in seven provinces. Only in Newfoundland and Labrador, Nova Scotia and New Brunswick did prices rise at a slower annual rate in December than in November.

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