Headline inflation of 3.1% was just under consensus, but up slightly versus August…

… primarily driven by higher gasoline prices (+28% Y/Y)…

… which pushed transportation inflation higher alongside increases in shelter and clothing. Ex-gasoline, inflation would have been 2.2% - moderating from 2.4% in August…

… on a sequential decline in travel tours and groceries. The price change in grocery stores is notable, given the 1.7% print is the lowest in over two years…

… which could be a negative for grocery stocks (Loblaw, Metro, Empire) if it persists, given the group’s historical relationship between the inflationary backdrop and excess returns over the index.

With the basket trading higher over the last few years and sitting near peak multiples today…

… there could be room to the downside if this second straight drag from food inflation is the start of a longer term trend.

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