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This article was published 27/3/2013 (1456 days ago), so information in it may no longer be current.
Manitoba saw one of the biggest inflationary spikes in the country in February, according to new Statistics Canada figures released today.
The agency said Manitoba’s annual inflation rate jumped to 2.2 per cent from 1.2 per cent in January, for a one percentage point change.
Newfoundland and Labrador and Saskatchewan were the only two provinces to see a bigger month-to-month change in their annual rates.
Newfoundland and Labrador’s rose by 1.4 per cent to 2.3 per cent, which was the highest annual rate in the land. And Saskatchewan’s rate jumped by 1.3 per cent to 1.8 per cent from 0.5 per cent in January.
The changes were part of a broad-based trend which saw inflationary pressures rise in all 10 provinces in February, Statistics Canada said. It said two of the biggest contributors were higher prices for gasoline and passenger vehicles.
Consumer prices in Canada also jumped by a surprisingly strong 1.2 per cent in February as a big hike in gasoline helped fuel the biggest month-to-month increase in inflation since January 1991.
The one-month pop lifted the country’s annual inflation rate by 0.7 points, also to 1.2 per cent, in February, reversing a trend to lower price gains that had taken the consumer price index to 0.5 per cent in January, the lowest level in more than three years.
Economists had expected inflation to start edging up, particularly as gasoline prices were known to have risen, but their best estimate was for a year-to-year increase of 0.8 per cent and a month-to-month increase of 0.7 per cent.
The Canadian dollar was up 0.13 of a cent at 98.52 cents US after the report.
Despite the one-month inflation shock, analysts said Canadians had little to worry about and that the Bank of Canada will likely discount the report as an anomaly. The roller-coaster movement in inflation was most likely due to temporary factors on both the upside and downside, they said.
"It was a surprise but it was predicated on some temporary factors that are likely to ease as we go forward into the next month or two, so I’m kind of inclined to look through it," said Derek Holt, vice-president of economics with Scotia Capital.
Holt noted that the steep increase in gasoline prices from January to February — 8.4 per cent — is not being repeated in March, he noted.
And the higher inflation rate of 1.2 per cent, while not good news for consumers, remains below the Bank of Canada’s efforts to keep inflation as close as possible to 2.0 per cent.
A prolonged period of below trend inflation is an indicator of soft domestic demand, which at its worst, could weaken the economy by encouraging consumers to delay purchases in expectation of lower prices in future.
David Madani of Capital Economics said the surprising February report does not alter the longer-term expectation of inflation as a spent force in Canada.
"With economic growth expected to remain below the economy’s potential, we expect disinflationary pressures to intensify in the coming months," he said.
The consensus view of the economy is that growth will be limited to 1.6 per cent this year, the slowest pace of expansion since the recovery began in July 2009. The view by Capital Economics is even tamer at 1.2 per cent.
Analysts were of the mind that the one-month pickup will have no bearing on next month’s Bank of Canada interest rate announcement, in which outgoing governor Mark Carney is widely expected to hold the line at one per cent and remain dovish on future rate hikes. Holt said the central bank is focused on stimulating growth, rather than on inflation.
Gasoline’s one-month spurt in February, after declining in January, pushed pump prices to an increase of 3.9 per cent annualized, contributing to a two per cent overall increase in the cost of transportation.
The other big mover was dealer auto prices, which rose 2.1 per cent on the month and 2.5 per cent over the past year, as fewer manufacturers’ rebates were offered in February.
— Canadian Press/Staff