Higher gasoline prices fueled inflation in October. The jump in gas prices pushed the 12-month increase in the Consumer Price Index to 2.3% in October from 1.8% in September, Statistics Canada said today.

However, StatsCan said the 12-month advance in the all-items index excluding energy rose only slightly to 1.5% in October, up from 1.4% in September 2004.

Gasoline prices increased 20.3% last month compared with the same time last year. Besides higher gasoline prices, consumers also paid more in October for cigarettes, fuel oil and property taxes compared with a year earlier.

Offsetting those higher costs was a drop in prices for cars, trucks, auto insurance and computer gear.

The Bank of Canada will consider the modest increase in core inflation when it makes its decision on interest rates next month.

In a written commentary, BMO Nesbitt Burns chief economist Sherry Cooper said the Bank of Canada “will no doubt be pleased by today’s results. The Bank had expected core inflation to average 1.5% in Q4, and October’s reading suggests that core inflation could come in under their projection, partly thanks to the robust loonie. While the Bank is still expected to hike rates again in December, it’s increasingly looking like they won’t have much more work to do in 2005.

In a separate release, StatsCan said the growth of the leading indicator continued to slow, from 0.3% in September to 0.2% in October, after hitting a two-year high of 1.0% in June.

In October, only two of 10 components surveyed for the index fell – the housing index and the average workweek in manufacturing, the agency said.

“Seven components rose, one more than last month, as sales of durable goods turned up,” StatsCan said.

However, “the housing index continued to retreat slowly from its 30-year high set in July, with a third straight drop in October – of 1.5%.”

Business spending strengthened again and many resource industries were operating at record levels.

Employment in the services sector was higher in October, the third consecutive increase after steady declines between December and July.

However manufacturers were cautious. They remained satisfied about inventory levels but kept a tight leash on labour needs.