News
Food, gas leads retreat in March inflation rate

April 20, 2012, Ottawa — Canada’s inflation rate in March was the lowest
in 1 1/2 years, as the growth in food and gasoline prices both slowed
dramatically, although consumers may be unimpressed because most items
were more expensive than in February.

April 20, 2012, Ottawa — Canada’s inflation rate in March was the lowest in 1 1/2 years, as the growth in food and gasoline prices both slowed dramatically, although consumers may be unimpressed because most items were more expensive than in February.

Statistics Canada reported Friday that the national inflation rate dipped seven-tenths of a point to 1.9 per cent – the first time since September 2010 that the rate was below the Bank of Canada’s sweet spot of two per cent.

Economists had anticipated a major retreat in the annual inflation rate, which had been rising the previous three months, but the drop was even more dramatic than expected. But unless Canadians have long memories, they won’t much notice the difference.

In fact, they may feel the cost of most things they buy are continuing to rise. That’s because in the most immediate comparison of prices – the non-seasonally adjusted month-to-month movement – consumers did in fact pay 0.4 per cent more for most items in March than they had in February.

But the dramatic drop-off in the annual inflation rate will be a welcome development for borrowers, since it will ease pressure on the Bank of Canada to hike interest rates as it suggested this week it soon might.

The central bank’s core inflation rate, which it uses to measure underlying price pressures after excluding volatile items like energy and some foods, also fell to 1.9 per cent in March.

On a year-over-year basis, Statistics Canada said the growth in consumer prices slowed across the country and on most items.
 
Most dramatic is in the cost of food, which was 2.2 per cent higher this March compared to last year, a major retreat from the 4.1 per cent difference seen in February.
 
And although the pump price of gas remains elevated and is 6.6 per cent higher now from last March, that’s less than the 8.9 per cent year-over-year increase seen in February. That contributed to a slowdown in increases on the cost of energy overall to 5.1 per cent from 7.2 the previous month, and electricity to 5.3 per cent from 8.7 per cent.

The overall cost growth in transportation, which is influenced by gas prices, also moderated to 3.8 per cent. Other big movers, although they comprised less significant parts of the overall basket, included fresh vegetables, which were 15.8 per cent less expensive in March than last year; video equipment, which fell 13.5 per cent; furniture, down 4.9 per cent; and women’s clothing, slipping 2.1 per cent.

The agency said price growth on a year-over-year basis slowed in every province in the country. On a month-to-month basis, prices rose in four of the eight major components, led by gasoline, which went up 4.4 per cent from February, and clothing and footwear, which increased by 3.2 per cent.