OTTAWA – The weight of low energy prices slowed the country’s annual inflation rate to just 0.8 per cent last month — its weakest reading since October 2013, Statistics Canada said Friday.
The agency’s April inflation reading, released less than a week before the Bank of Canada’s next scheduled interest-rate announcement, was much lower than the 1.2 per cent increase in March.
Statistics Canada’s latest consumer price index found that cheaper year-over-year energy prices were among the biggest factors behind the slower inflation rate, as prices rose in seven of the index’s eight major categories.
Gasoline prices fell 21 per cent in April compared with the previous year, while fuel oil tumbled 20 per cent and natural gas dropped by 14.6 per cent, the Statistics Canada report said. The agency found that prices in all other major categories rose to the point that excluding energy items would bring the inflation rate up to 2.2 per cent.
The items with the most upward pressure on prices included meat, which rose 11.2 per cent compared to a year earlier. Home and mortgage insurance rose 8.6 per cent and telephone services crept up 6.3 per cent.
Consumer prices rose last month in seven provinces — with Newfoundland and Labrador, Prince Edward Island and New Brunswick registering negative inflation. Saskatchewan had the highest inflation at 1.2 per cent.
On a seasonally-adjusted monthly basis, inflation dropped 0.1 per cent in April, which followed an increase of 0.3 per cent in March.
The core inflation rate, which is monitored closely by the Bank of Canada and excludes some volatile items such as gasoline, was 2.3 per cent last month. It followed a reading of 2.4 per cent in March.
In February, the central bank warned the turbulence of the global oil-price crash could briefly bump inflation into negative territory, but it also said at the time that there was no reason to worry about outright deflation.
Even with the weaker inflation rate for April, Bank of Canada governor Stephen Poloz is widely expected to stand pat on the key overnight interest rate at next Wednesday’s policy meeting.
Last month, the bank said its outlook for inflation, the key indicator behind rate decisions, remained “roughly balanced.”
Jimmy Jean, a senior economist with Desjardins, said the lower core inflation reading will probably provide some relief for the Bank of Canada.
The inflation figures, he added, could signal that the temporary price-increasing effect from the low exchange rate on items like food and clothing has abated.
“I think they will find some degree of vindication in those numbers,” Jean said of the Bank of Canada.
“But I don’t think anyone had any particular concern that inflation was running away — not in the current dynamics with the Canadian economy. We’re expecting very weak growth in Q1 (the first three months of 2015).”
Statistics Canada will release the first-quarter gross domestic product numbers next week.
Poloz has said the data for that period could look “atrocious,” though he has remained hopeful that the economy will start to rebound in the second quarter.
TD economist Jonathan Bendiner wrote in a note to clients Friday that while real GDP is expected to move upwards in the second quarter, he still anticipates “further softness” in inflation over the next two quarters. He said lighter inflationary pressure will continue until the initial effect from lower oil prices has run its course.
“All told, we expect the Bank of Canada to remain on hold at next week’s fixed announcement date,” Bendiner wrote.
Statistics Canada also released March data on total retail sales, which it estimates were $42.47 billion, an increase of 0.7 per cent compared to the previous month.
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Note to readers: This is a corrected story. A previous version had an incorrect inflation for Saskatchewan.