Author: Consultant

Evidently, you’re not the only investor who is nervous about Enbridge ENB-T -0.89%decrease. In the past 16 months, the pipeline operator’s shares have lost more than one-quarter of their value as dividend stocks of all kinds have been hammered by surging interest rates and fears of slowing economic growth. Enbridge’s stock, which closed Friday at $43.63 in Toronto, is now languishing about 34 per cent below its record high of more than $66, reached in 2015.

As Enbridge’s shares have slumped, its dividend yield – which moves in the opposite direction to the price – has climbed to more than 8 per cent. The yield has also gotten a boost from annual increases in the dividend, which has nearly tripled over the past decade.

Given Enbridge’s outsized yield, it’s reasonable to ask: Is the dividend safe? Or will Enbridge meet the same fate as Algonquin AQN-T -2.69%decrease, Kinder Morgan KMI-N -0.12%decrease and other former dividend-growth darlings whose rich payouts were ultimately unsustainable?

The short answer is: I don’t think you need to lose any sleep.

One reason for the recent weakness in Enbridge’s stock price is its agreement in September to acquire gas utilities in five U.S. states from U.S-based Dominion Energy Inc. D-N -1.53%decrease for US$14-billion. To help finance the acquisition, which was done at an attractive price of about 16.5 times the utilities’ earnings, Enbridge issued $4.6-billion of shares to a syndicate of underwriters in what is known as a bought deal.

However, to sell such a large chunk of stock amid less-than-favourable market conditions, the new shares were priced at $44.70 – a discount of more than 7 per cent to Enbridge’s closing price before the acquisition was announced.

Cory O’Krainetz, an analyst with Odlum Brown, called the bought deal price “disappointing.” But he said the acquisition, which will nearly double Enbridge’s lower-risk utilities business and create new avenues for growth, was “an opportunity Enbridge couldn’t refuse and … should be value accretive to shareholders. We expect Enbridge shares to trade at or below the equity offer price over the near term, but we see significant upside over the long term.”

Mr. O’Krainetz was right about Enbridge trading below the bought deal price, as the market has to absorb nearly 103 million new shares. But he’s not the only analyst who sees the gas utility acquisitions as being a good long-term fit for Calgary-based Enbridge.

The deal, which includes utilities in Ohio, North Carolina, Utah, Wyoming and Idaho, is “a unique opportunity given its scale and attractive valuation,” Robert Catellier, an analyst with CIBC World Markets, said in a note to clients. By reducing the weighting of Enbridge’s liquids pipelines business to about 50 per cent from 57 per cent, and increasing its utilities weighting to 22 per cent from 12 per cent, the acquisition accelerates Enbridge’s transition to lower-carbon energy and lowers its business risk thanks to the increase in its regulated earnings.

While Mr. Catellier acknowledged that Enbridge still faces risks related to securing the remaining funding for the transaction, he said the opportunity to invest about $1.7-billion annually in the rate base of the U.S. utilities will enhance Enbridge’s ability to achieve its target of mid-single-digit growth in EBITDA (earnings before interest, taxes, depreciation and amortization) over the next several years. Rate base is the value of assets on which a utility is permitted to earn a regulated rate of return, so an increasing rate base leads to higher earnings.

Enbridge’s growing earnings, in turn, should support future dividend increases, while preserving the company’s investment-grade credit ratings and keeping its dividend payout ratio within its target range of 60 per cent to 70 per cent of distributable cash flow per share, the company said. (Enbridge defines DCF as operating cash flow, minus preferred share dividends, maintenance capital expenditures and other unusual and non-operating items.)

Still, investors should temper their expectations for dividend growth. Until a few years ago, Enbridge was hiking its payout at double-digit percentage rates annually, but future raises will likely be in the low single digits. Mr. Catellier projects that the annual dividend will increase by 3.1 per cent to $3.66 for 2024, which is in line with the 3.2-per-cent raise that Enbridge announced last November.

So, not only does Enbridge’s dividend appear to be safe, but it will almost certainly continue to grow, albeit at a modest pace. Hopefully, you’re feeling a little less antsy now.

E-mail your questions to jheinzl@globeandmail.com.

An Indigenous-backed project seeking to export liquefied natural gas has signed a deal to support TC Energy Corp.’s TRP-T -0.13%decrease pipeline plans in northern British Columbia, leaving Enbridge Inc.’s ENB-T -0.20%decrease competing route in limbo.

The Nisga’a Nation, Western LNG and a group of natural gas producers called Rockies LNG are partners in their proposed Ksi Lisims LNG project near Gitlaxt’aamiks, which is home to the Nisga’a Lisims government led by elected president Eva Clayton.

Calgary-based TC Energy has been hired to work on revised designs for the planned Prince Rupert Gas Transmission (PRGT) pipeline, according to documents filed by Ksi Lisims this week to the B.C. Environmental Assessment Office. The filings are part of an application to obtain an environmental assessment certificate.

The PRGT route was originally intended to stretch nearly 900 kilometres from northeast B.C. to Lelu Island near Prince Rupert, B.C., and supply natural gas to Pacific NorthWest LNG. But Malaysia’s state-owned Petronas cancelled the Pacific NorthWest LNG joint venture in 2017.

Revisions need to be made to shorten the route so that natural gas would be transported from northeast B.C. to a site at Wil Milit on Pearse Island on the West Coast.

Ksi Lisims said its agreement with TC Energy calls for PRGT “to preserve the regulatory permits, prepare amendments for a potential delivery point to the site and develop work plans for the next phase.”

The decision by Ksi Lisims to sign the contract with TC Energy means Enbridge’s proposed Westcoast Connector Gas Transmission pipeline venture faces an uncertain future.

Enbridge spokesperson Jesse Semko said in a statement on Thursday that Westcoast Connector will continue to do work on its pipeline route. “That work includes discussing this proposed project with Indigenous groups, commercial partners and other stakeholders while simultaneously ensuring alignment with the B.C. government’s emission reduction, climate change and hydrogen strategy,” he said.

Westcoast Connector and PRGT initially received their environmental assessment certificates in 2014, and won approval for five-year extensions in 2019, giving them until Nov. 25, 2024, to “substantially start” pipeline construction.

“TC Energy would be responsible for obtaining any additional regulatory approvals, as well as potentially constructing, operating and owning this pipeline,” Ksi Lisims told the B.C. regulator.

Rockies LNG, whose president is Charlotte Raggett, is based in Calgary. Members of the group of gas producers are Birchcliff Energy Ltd., Advantage Oil & Gas Ltd., Peyto Exploration & Development Corp., NuVista Energy Ltd., Paramount Resources Ltd., Ovintiv Inc., Crescent Point Energy Corp. and Tourmaline Oil Corp., which announced this week that it will be acquiring another Rockies member, Bonavista Energy Corp.

The Nisga’a Nation, which signed a treaty in 1998, is welcoming the regulatory application by Ksi Lisims.

In March, the B.C. government introduced new environmental standards for LNG projects in a bid to spur net-zero emissions of greenhouse gases by 2030.

“We’re proud to see our net-zero project take another step forward,” Ms. Clayton said in a statement. “Ksi Lisims LNG is a once-in-a-generation opportunity for our people to build prosperity and economic independence.”

Ksi Lisims plans to use two floating facilities to produce LNG, with hydroelectricity powering motors for compressors in the liquefaction process. The project would then deploy other vessels to ship LNG to Asia, starting exports by early 2028.

“Ksi Lisims LNG will be one of the most significant Indigenous-supported industrial developments in Canadian history. The project is an example of economic reconciliation in action,” Ksi Lisims spokesperson Rebecca Scott said in a statement.

But climate activist organizations say the focus should be on renewable energy, not on fossil fuels such as natural gas and LNG. The David Suzuki Foundation and the Pembina Institute published separate studies in May that issued climate warnings about looming LNG exports from B.C.

A neighbouring First Nation, the Lax Kw’alaams, expressed doubts last year that Ksi Lisims could meet its goal of net-zero emissions. The Lax Kw’alaams band council opposes the Nisga’a-backed venture.

A portion of the proposed route for PRGT would cross the Gitxsan Nation’s unceded traditional territory.

“We appreciate the opportunity to explore the viability of this important project and will continue our engagement efforts with Indigenous and community partners as we progress discussions in this initial phase,” TC Energy spokesperson Suzanne Wilton said in an e-mail.

While revised route designs will be shorter than originally planned, PRGT would still be longer than the contentious Coastal GasLink pipeline project to be operated by TC Energy.

Coastal GasLink will be supplying the Shell PLC-led LNG Canada joint venture in Kitimat, B.C., where exports of natural gas in liquid form to Asia are slated to begin in mid-2025.

Coastal GasLink’s construction is 98 per cent completed. A group of Wet’suwet’en Nation hereditary chiefs has led a campaign to oppose Coastal GasLink, with 28 per cent of the route crossing the Wet’suwet’en’s unceded traditional territory. Wet’suwet’en hereditary chiefs say they have jurisdiction over that territory.

| Published: 10/19/2023 5:35 PM ET

The Canadian market closed at a two-week low on Thursday, as stocks fell amid concerns about interest rates and geopolitical tensions.

Healthcare, real estate, utilities and financials shares were among the major losers.

The benchmark S&P/TSX Composite Index ended with a loss of 101.89 points or 0.52% at 19,348.81.

Bausch Health Companies (BHC.TO) ended 5.37% down, and Tilray Inc (TLRY.TO) drifted down nearly 3%.

Real estate stocks Allied Properties (AP.UN.TO) ended nearly 6% down. Granite Real Estate (GRT.UN.TO) ended 3.5% down, while CDN Apartment (CAR.UN.TO), Riocan Real Estate (REI.UN.TO) and Killam Apartment (KMP.UN.TO) lost 2 to 2.7%.

Among the stocks in the Utilities sector, Brookfield Infra Partners (BIP.UN.TO), Innergex Renewable Energy (INE.TO), Algonquin Power and Utilities Corp (AQN.TO), Hydro One (H.TO) and Northland Power (NPI.TO) lost 1.4 to 3.2%.

Financials shares Goeasy (GSY.TO), Sun Life Financial (SLF.TO), Brookfield Corporation (BN.TO), Brookfield Asset Management (BAM.TO), Onex Corp (ONEX.TO) and EQB (EQB.TO) ended down 2.3 to 3%.

Mullen Group Ltd. (MTL.TO) gained 2.3% on strong results. The company reported a net income of $39.1 million, or $0.44 per share, for the third-quarter, up 2.9% and 7.3%, respectively, from a year-ago.

Canada Goose Holdings Inc (GOOS.TO) ended more than 4% down following a rating downgrade.

Data from Statistics Canada showed industrial producer prices in Canada rose by 0.4% in September, easing from an upwardly revised 1.9% hike in August. The Industrial Product Price Index increased 0.6% year-on-year in September following an upwardly revised flat reading in August.

Raw materials price index in Canada rose by 3.5% month-over-month in September, up from a 3% increase in August. Year-on-year, raw materials prices increased 2.4% in September.

Federal Reserve Chairman Jerome Powell acknowledged recent signs of cooling inflation, but said Thursday that the slowing in price increases was not enough yet to determine a trend and that the central bank would be “resolute” in its commitment to its 2% mandate.

“Inflation is still too high, and a few months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal,” Powell said in prepared remarks for his speech at the Economic Club of New York. “We cannot yet know how long these lower readings will persist, or where inflation will settle over coming quarters.”

“While the path is likely to be bumpy and take some time, my colleagues and I are united in our commitment to bringing inflation down sustainably to 2 percent,” Powell added.

The speech comes with questions over where the Fed heads from here after a succession of interest rate hikes aimed at cooling inflation. Powell said he doesn’t think rates are too high now. Stocks briefly turned lower as Powell spoke and the 10-year Treasury yield neared 5%.

“Does it feel like policy is too tight right now? I would have to say no,” he said. Still, he noted that “higher interest rates are difficult for everybody.”

Powell noted the progress made toward the Fed’s twin goals.

In recent days, data has shown that while inflation remains well above the target rate, the pace of monthly increases has decelerated and the annual rate has slowed to 3.7% from more than 9% in June 2022.

“Incoming data over recent months show ongoing progress toward both of our dual mandate goals —maximum employment and stable prices,” he said.

The speech was delayed at the onset by protesters from the group Climate Defiance who charged the dais at the club’s dinner and held up a sign saying “Fed is burning” surrounded by the words “money, futures and planet.”

After a short delay, Powell noted the labor market and economic growth may need to slow to ultimately achieve the Fed’s goal.

“Still, the record suggests that a sustainable return to our 2 percent inflation goal is likely to require a period of below-trend growth and some further softening in labor market conditions,” Powell said.

Fed officials have been using interest rate hikes in part to try to level out a supply-demand imbalance in the jobs market. The Fed has raised rates 11 times since March 2022 for a total of 5.25 percentage points. Coming from the near-zero level for the fed funds rate, that has taken the benchmark rate to its highest level in some 22 years.

“We’re very far from the effective lower bound, and the economy is handling it just fine,” Powell said.

The comments come the same day initial jobless claims hit their lowest weekly level since early in 2023, indicating that the labor market is still tight and could exert upward pressure on inflation.

Robust job creation in September and a slow pace of layoffs could put progress on inflation at risk.

“Additional evidence of persistently above-trend growth, or that tightness in the labor market is no longer easing, could put further progress on inflation at risk and could warrant further tightening of monetary policy,” he said.

In recent days, other Fed officials have said they think the Fed can be patient from here. Even some members who favor tighter monetary policy have said they think the Fed can halt rate hikes at least for now while they watch the lagged impact the rate hikes are expected to have on the economy.

Markets widely expect the Fed to hold off on additional rate hikes, though there remain questions over when officials might begin cutting rates.

Powell was noncommittal on the future of policy.

Given the uncertainties and risks, and how far we have come, the Committee is proceeding carefully. We will make decisions about the extent of additional policy firming and how long policy will remain restrictive based on the totality of the incoming data, the evolving outlook, and the balance of risks,” he said.

Bank of Nova Scotia BNS-T -2.17%decrease is cutting 3 per cent of its global work force ahead of launching its strategic turnaround plan, deepening the streak of job cuts on Bay Street this year.

The restructuring plans announced Wednesday – which also include trimming some real estate holdings and writing down the value of an investment in China-based Bank of Xi’an Co. Ltd. – mark chief executive officer Scott Thomson’s first major move to slash costs since taking on the top job in February.

Scotiabank said that the $590-million in charges to cover the costs will affect its fourth-quarter earnings per share by about 49 cents and its common equity tier 1 ratio – a measure of a lender’s ability to absorb losses – by approximately 10 basis points. (A basis point is one-hundredth of a percentage point.) Scotiabank expects to book the cost savings from these cuts by 2025.

Canada’s fourth-largest lender is preparing to unveil an overhaul strategy as Mr. Thomson seeks to revive the lender’s beleaguered share price. He has said that the plan – set to be unveiled in December – will focus on improving employee culture to improve customer experience, as well as expanding its Canadian business and rejigging its international unit in Latin America.

Scotiabank said in a statement its cuts to its team of 91,000 employees are a result of the bank’s digitization and automation efforts, as well as changes in how customers access their banking products and services. The lender is also continuing to streamline its operations to reallocate resources to key areas where it believes it can expand its business. It did not disclose the total number of jobs affected.

Scotiabank CEO Scott Thomson unveils first leadership shakeup

Some of Canada’s other major banks have been trimming their teams as the lenders face mounting expenses, rising provisions for potential loan defaults and tightening capital requirements. Scotiabank joins Royal Bank of Canada RY-T -1.63%decrease and Bank of Montreal BMO-T -2.29%decrease in unveiling broader cutsin recent months.

In an internal note to Scotiabank employees viewed by The Globe and Mail, Mr. Thomson said that the leadership team is treating affected staff “compassionately and with care,” and helping people find new jobs in the bank, where possible.

“I know this change is difficult and I want to thank you for your support and continued focus on delivering for our clients, the bank and each other,” Mr. Thomson said in the memo. “Today’s announcement is an important step in enabling our new strategy. Moving forward, we will be focused on unlocking our significant potential and ensuring our bank is better equipped to deliver profitable and sustainable growth.”

RBC was the first major lender to signal staffing reductions. During its third-quarter results release at the end of August, the bank said that its number of full-time employees fell 1 per cent from the previous quarter as workers left the bank. It said it expects to further decrease its work force by 1 per cent to 2 per cent next quarter.

Bank of Montreal also shed jobs, reducing its work force by 2.5 per cent. The costs related to the staff cuts stretched across the bank, but largely stemmed from the bank’s Canadian personal and commercial banking unit, its corporate division and its capital markets business.

Scotiabank’s work-force reductions will result in a restructuring charge and severance provisions of about $247-million.

RBC analyst Darko Mihelic said that the moves mark “a small step in the right direction” and that he interprets “the write-downs as a clean-up of the balance sheet.”

The layoffs were part of a broader announcement on costs that Scotiabank expects to affect its earnings results for the fourth quarter. The bank is consolidating its real estate footprint. It anticipates a charge of $63-million in the fourth quarter as it vacated certain premises and service contracts.

“Restructuring charges at the Canadian banks in difficult revenue environments are not unusual, and we may see other banks follow suit (as early as Q4),” BMO analyst Sohrab Movahedi said in a note to clients.

It will also post an impairment charge of $280-million related to the bank’s 18-per-cent investment in Bank of Xi’an. The China-based lender’s $581-million market value has consistently been below the $1-billion carrying value, the Canadian bank said.

Scotiabank has operated in China for 30 years, according to its website. In addition to its investment in Bank of Xi’an, it has two branches in Shanghai and Guangzhou, and a wealth-management joint venture with the Bank of Beijing.

Shares of Scotiabank fell 2.2 per cent in Toronto on Wednesday.

Published: 10/18/2023 5:37 PM ET

The Canadian market ended on a weak note on widespread selling on Thursday with those from industrials and financials sectors suffering sharp losses.

Rising bond yields, concerns about the outlook for interest rates and escalating tensions in the Middle East weighed on the market.

According to reports, a deadly missile attack on Al-Ahli Baptist Hospital in Gaza killed more than 500 people including women and children.

Hamas attributed the blast to an Israeli airstrike, but the Israeli military said it was not involved and the explosion was caused by a misfired Palestinian rocket.

The benchmark S&P/TSX Composite Index ended down 242.10 points or 1.23 percent at 19,450.70, slightly off the day’s low of 19,434.34.

BRP Inc (DOO.TO) fell 7.3%. ATS Corporation (ATS.TO) drifted down nearly 6%. Stantec Inc (STN.TO), TFI International (TFII.TO), Magna International (MG.TO), Cargojet (CJT.TO), Canadian National Railway (CNR.TO), goeasy (GSY.TO), Premium Brands Holdings (PBH.TO), Bank of Montreal (BMO.TO) and Fairfax Financial Holdings (FFH.TO) lost 2 to 4.5%.

CGI Inc (GIB.A.TO) announced that its subsidiary CGI Federal has received a multi-year contract worth about $522.6 million to modernize systems and technology of the U.S. Environmental Protection Agency. The stocks ended marginally up.

On the economic front, data from the Canada Mortgage and Housing Corporation showed housing starts in Canada edged up by 8% over a month earlier to 270,466 units in September.

A wave of high-profile mergers and acquisitions in the Canadian oil patch is a sign of an industry that is flush with cash and increasingly confident in the short– and medium-term outlook for fossil fuels, experts say.

Since the start of the year, there have been a number of billion-dollar-plus deals struck in the Canadian energy sector, including Crescent Point Energy Corp.’s CPG-T +2.20%increase $1.7-billion purchase of Spartan Delta Corp.’s Montney oil field assets, ConocoPhillips’ COP-N +0.18%increase approximately $4-billion purchase of TotalEnergies’ TTE-N +0.89%increase Surmont oil sands project, and Suncor Energy Inc.’s SU-T +0.51%increase $1.47-billion acquisition of Total’s stake in the Fort Hills oil sands mine.

The latest headline-grabbing deal was announced Monday, when Tourmaline Oil Corp. TOU-T +1.77%increase – Canada’s largest natural gas producer – said it would purchase privately held Bonavista Energy Corp. for $1.45-billion.

Strathcona Resources Ltd. SCR-T -1.13%decrease also recently merged with Pipestone Energy Corp. PIPE-T +1.04%increase in an all-stock deal, with the merged company expected to be the fifth largest oil producer in the country.

According to figures from Calgary-based Sayer Energy Advisors, M&A activity in the Canadian energy sector has totalled $12.7-billion since the start of 2023. While that’s less than the $15.2-billion and $17.9-billion the sector saw in 2022 and 2021, respectively, it is occurring at a time when the Canadian oil patch has now benefited from two years of strong commodity prices. Many companies are flush with cash and have rapidly been paying down debt, giving them a strong enough balance sheet to pursue growth through acquisitions.

“I think you’ll still see some more consolidation, for sure. I think there’s still going to be some more transactions,” said Tom Pavic, president of Sayer Energy Advisors.

“A number of companies have the capital to pursue these transactions – they’ve been generating quite a bit of cash flow.”

Heather Exner-Pirot, director of energy, natural resources and environment for the Macdonald-Laurier Institute, said the Canadian oil patch saw a significant amount of consolidation in 2021 as the country began to emerge from the COVID-19 pandemic. But she said the deals that are happening now are very different.

“Immediately post-COVID it was a sign of weakness. There were some companies that just weren’t going to make it and were vulnerable, and were ripe for the picking by those that were still strong enough to do it,” she said.

“Now what I think we’re seeing are signs of strength. These companies have excellent balance sheets and the capacity to go and acquire and strengthen their empires.”

South of the border, U.S. multinational oil giant Exxon Mobil Corp. XOM-N +1.28%increase announced last week it will acquire Pioneer Natural Resources PXD-N +1.33%increase in a US$59.5-billion megadeal.

That merger has been interpreted by many industry watchers as Exxon demonstrating its confidence in fossil fuels, even as the world continues to seek to transition to lower-carbon energy sources in order to slow the pace of climate change.

Exner-Pirot said she agrees with that assessment, and added that the global energy crisis sparked by Russia’s invasion of Ukraine has brought investors flooding back to the industry on the assumption that fossil fuels will still be in high demand in at least the short and medium term.

“(Oil and gas) is the best-performing sector, and I think investors are looking for ways to get back into energy,” she said.

“Definitely, people are feeling bullish.”

Still, Exner-Pirot pointed out that Canada’s energy sector has far fewer players now than it did prior to the oil price crash of 2015, an industry-shaking event that drove another major wave of consolidation. She said the fact that so much consolidation has already occurred naturally limits the amount of deal-making that can take place now.

“Where Exxon and Pioneer made sense is that so much of their land overlapped. So you really could get efficiencies by combining them – you really could produce a cheaper barrel,” she said.

“And I think the extent to which that’s possible in the Canadian oil patch is starting to diminish, only because there have been so many acquisitions. I don’t think we’re going to see a whole tsunami of new deals.”

Canada’s inflation rate unexpectedly dipped in September, a result that alleviates pressure on the Bank of Canada to resume raising interest rates next week.

The Consumer Price Index rose 3.8 per cent in September from a year earlier, down from 4 per cent in August, Statistics Canada said Tuesday in a report. Analysts on Bay Street were expecting the inflation rate to remain at 4 per cent. The CPI fell 0.1 per cent on a monthly basis.

The Bank of Canada has warned that bringing inflation back to its 2-per-cent target could be a bumpy ride, and that’s proven to be the case. After easing to 2.8 per cent in June, the annual inflation rate climbed over the summer, largely because of higher energy prices.

Live updates: Canada annual inflation rate edges down to 3.8% in September

Now, inflation is back on a downward trajectory. Higher interest rates are weighing on consumption across the economy, while gasoline prices have fallen in recent weeks. Economists said the October CPI report should bring another decline in the inflation rate.

Tuesday’s report had a significant effect on monetary policy expectations. Bond yields tumbled after the release, while financial markets priced in lower odds the Bank of Canada would raise its benchmark interest rate by a quarter-point on Oct. 25, its next decision date.

https://charts.theglobeandmail.com/S5K2Q/6/

To date, the BoC has raised its key rate to 5 per cent – the highest since 2001 – from crisis lows of 0.25 per cent. This abrupt shift in lending conditions is putting pressure on household and government finances, while economic growth has stagnated in recent months.

Some analysts on Bay Street said the Bank of Canada had done its job with interest rates – that 5 per cent was likely the peak for this cycle.

“Given that inflation is the most lagging of indicators, and the economy is clearly weakening, we’re likely to see ongoing disinflationary pressure,” Benjamin Reitzes, a Bank of Montreal strategist, said in a client note. “There’s no need for further rate hikes in Canada.”

There were widespread improvements in September. Grocery prices rose 5.8 per cent in September on a year-over-year basis, down from 6.9 per cent in August. At peak levels, grocery inflation was running at more than 11 per cent. This deceleration was foreshadowed by weaker price increases – or even declines – at earlier stages of the food supply chain.

Over the past year, prices have risen 4.4 per cent for meat, 4 per cent for dairy products and 3 per cent for fresh fruit. However, Statscan cautioned that prices were being compared to a spike last year, a “base-year effect” that is leading to more subdued numbers.

“The slowing trend in food price inflation is expected to continue through at least the turn of the year and likely into 2024,” Mr. Reitzes said.

Supply-chain issues appear to be firmly in the rearview. Prices for durable goods rose just 0.4 per cent in September from a year earlier, down from 1.4 per cent in August. Goods related to the beleaguered housing sector – such as furniture and appliances – are declining in price.

The travel industry had an outsized effect on the September numbers. Airfare prices fell 21 per cent, which Statscan attributed to a larger availability of flights.

Still, there are some pesky aspects of inflation. Housing costs rose 6 per cent in September, matching the annual gain seen in August. Rents jumped 7.3 per cent in September, up from 6.5 per cent in August, a sign of how Canada’s housing shortage is affecting the numbers.

But over all, inflationary pressures are abating. The Bank of Canada’s preferred measures of core inflation, which remove volatile movements in the CPI, slowed down in September.

Royce Mendes, head of macro strategy at Desjardins Securities, said around 40 per cent of the items in the CPI basket were experiencing inflation of 5 per cent or higher – down 10 percentage points from August.

“The slowdown in most measures of inflation combined with the lower volatility across categories should easily give the Bank of Canada enough confidence to hold rates next week,” he wrote in an investor note.

Interest-rate swaps, which capture market expectations about monetary policy, are pricing in a 15-per-cent chance the BoC hikes interest rates by a quarter-point, down from 42 per cent before the inflation report was published.

“Canadian consumers can breathe a sigh of relief, firstly because inflation appears to be easing again and secondly because that deceleration diminishes the chances of further interest rate hikes from the Bank of Canada,” Andrew Grantham, senior economist at CIBC Capital Markets, said in a research note.

“While inflation is admittedly still well above target, there were signs within today’s release that the weakening of domestic demand is now starting to impact pricing in some areas and should continue to do so moving forward, without the need for further interest rate hikes.”