Inflation heats up to 1.5% in December as higher gas prices offset cheaper food

The cost of living in Canada increased by 1.5 per cent last month, as slightly more expensive gasoline prices helped offset slightly cheaper food prices.

Statistics Canada reported Friday that seven of the eight components it tracks were more expensive in December compared to November. The transportation index, which includes gas, and the shelter index, which includes rental costs, were the biggest contributors to the upswing.

Economists had expected a bigger increase of 1.7 per cent.

The food index was the lone laggard, declining for the third consecutive month. Consumers paid 1.3 per cent less for food in December than they did in the same month a year ago.

"An ongoing collapse in food prices continues to weigh heavily on overall inflation, with prices dipping again last month and now down a honking 2.8 per cent year over year at your local grocer — that's the steepest fall since the early 1990s.," BMO economist Doug Porter said. "On the flip side, gasoline prices are rising quickly, up 3.1 per cent and now up 5.5 per cent from the very low ebb a year ago."