Inflation rate drops to six-month low
OTTAWA–Canada’s inflation rate tumbled to its lowest level in six months in February as the strong dollar continued to give consumers a break on everything from the automobiles they drive to the food they eat.
Consumer prices last month were 1.8 per cent higher than a year ago, down significantly from January’s 2.2 per cent rate.
The core index, which the Bank of Canada uses to gauge underlying inflationary pressures, rose for the first time since June, to 1.5 per cent from 1.4 per cent in January.
The uptick in core prices, excluding volatile fuel and food costs, was unexpected, but yesterday’s Statistics Canada report was seen as leaving the Bank of Canada room to keep cutting interest rates to boost economic activity without stoking inflation.
"There may be less urgency to cut rates than stateside, but the bank still has plenty of leeway to do what they see fit in the months ahead," BMO deputy chief economist Douglas Porter said.
The dollar rose yesterday 0.61 of a cent (U.S.) to 100.68 cents.
The easing inflationary trend in Canada was widespread, but especially acute among items sensitive to currency fluctuations.
The cost of automobiles slid by 6.8 per cent from last year, the steepest drop since February 1956, as a result of markdowns and discounts from car makers.
Food was also cheaper in February, especially imported fresh produce payday loans. Fresh vegetables fell 16.9 per cent from a year earlier and fresh fruit dropped 14.5 per cent, with oranges 36.2 per cent cheaper.
As well, prices for computer equipment and supplies crashed 15.4 per cent in February, and women’s clothes slipped 3 per cent.
Fuel remained the key upward propellant of inflationary pressure. Gasoline prices rose 17.1 per cent last month compared with a year earlier, while the cost of heating oil and other fuels jumped 23.9 per cent from last year.
Mortgage interest costs also continued to climb, as did costs of home maintenance.
Travel costs, which had retreated by 0.2 per cent in January partly because of the cut in the goods and services tax, were up 0.4 on a month-over-month basis in February, amid "strong upward pressure exerted by higher tour package costs," Statistics Canada said.
RBC economist Dawn Desjardins said she expects both all-items inflation and the core rate will remain at the lower end of the Bank of Canada’s target band of 1 per cent to 3 per cent.
Ontario experienced the largest dip in inflation with a year-over-year consumer price increase of 1.5 per cent, off from 2.1 per cent in January.