OTTAWA – A steep decline in the price of gasoline last month pushed Canada’s inflation rate down to 0.4 per cent in April, the lowest level since October 2009 and a bigger drop than analysts had expected.
Gasoline prices at the pump in April was down six per cent from a year earlier, also the largest year-to-year since October 2009.
On a month-to-month basis, consumer prices also fell by a bigger than expected 0.4 per cent. Analysts had been looking for a decline of 0.2 per cent month-to-month, according to a consensus estimate.
The steep drop-off in inflation will likely bring to a halt any talk about the Bank of Canada needing to start raising interest rates, given that inflation is far from the bank’s ideal of two per cent annual inflation and below low end of its target range.
Two provinces — British Columbia and New Brunswick — did fall into negative inflation territory, registering overall price decreases of 0.8 per cent and 0.2 per cent respectively.
Even the central bank’s core inflation index, which excludes volatile items such as gasoline, is getting closer to falling out of the desired range of one-to-three per cent, after dropping to 1.1 per cent in April from 1.3 per cent the previous month.
Analysts had expected the core rate to be 1.2 per cent.
While prices have been moderating the past couple of months, April’s report saw outright price declines across a broad range of consumer goods and services.
Aside from gasoline, overall transportation costs fell 2.1 per cent, while mortgage interest costs dropped 4.3 per cent, video equipment 10.9 per cent, automobiles 0.7 per cent and travel tours 4.8 per cent. On a month-to-month basis, clothing, restaurant meals and furniture also fell.
Prices were not lower for all items, but in many cases the pace of increases moderated.
Food prices rose 1.3 per cent following a 1.8 per cent increase in March, while restaurant meals increased by 1.2 per cent following a 2.2 rise in March. Shelter costs did increase to 1.3 per cent annualized, from 1.1 in March, as electricity rose 4.2 per cent and rent advanced by 1.6 per cent. Also registering gains were property taxes, natural gas and homeowner replacement costs.
Regionally, aside from the negative inflation in British Columbia and New Brunswick, most provinces saw slowing price pressures. The exceptions were Prince Edward Island, which saw a 0.6 per cent increase to 1.8 per cent, and Alberta, where the inflation rate rose to 1.3 per cent.