Business

Winnipeg Free Press - PRINT EDITION

Inflation down, but will you notice?

By: Julian Beltrame

Posted: 04/21/2012 3:20 AM | Comments: 0

OTTAWA -- Canada's inflation rate dipped to the lowest level in 18 months in March as price gains in food and gasoline slowed dramatically -- although consumers may not see the savings.

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

Manitoba recorded the lowest inflation rate in the country, at 1.4 per cent, down from 1.7 per cent the previous month.

Economists had anticipated a major retreat in the annual inflation rate, which had been rising the previous three months, but the drop nationally was 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 goods continues to rise. That's because in the most immediate and visible 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 a month earlier. They paid more for gas, transportation, clothing and footwear and the costs associated with recreation, education and reading. But the dramatic drop in the annual inflation rate -- current prices compared with March 2011 -- 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 such as energy and some foods, also fell to 1.9 per cent in March.

"The easing in inflation pressure is very welcome news for Canadians," said Arlene Kish of IHS Global Insight.

"Canadians are already cash-strapped given our low savings rate. As well, based on research from the Bank of Canada, some consumer purchases are being financed by home equity lines of credit."

The inflation numbers won't be much of a surprise to the central bank. It had predicted earlier this week the consumer price index would "moderate" and "be around two per cent... as the economy reaches its production potential" in about a year's time.

Bank of Montreal economist Robert Kavcic said given that gas prices continued to rise into April last year, it may be possible to see annual inflation fall further next month should gas prices remain stable this April.

As for food, the correction was long overdue. "We're overdue to see food inflation cool because agricultural prices started coming off as early as the middle of last year," he explained.

-- The Canadian Press

Republished from the Winnipeg Free Press print edition April 21, 2012 B6

Factual inaccuracy? Something missing? Help improve our journalism.

Know about news? Share your story suggestions, photos and video.

Spelling error? Punctuation problem? Send us an email if you’ve found a typo.

More Business

Undock

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is register and/or login and you can join the conversation and give your feedback.

Have Your Say

New to commenting? Check out our Frequently Asked Questions.

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010.