Winnipeg Free Press - PRINT EDITION

Manitoba, P.E.I. tied for highest inflation in April

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MANITOBA'S annual inflation rate remains stubbornly high compared with most other provinces, although relatively tame by historical standards.

Statistics Canada's latest consumer price index report, released Friday, pegs Manitoba's annual inflation rate at 1.8 per cent in April.

That left it tied with Prince Edward Island for the highest annual rate in the country. It was also more than four times higher than Canada's annual inflation rate for April of 0.4 per cent. The other provinces had rates ranging from minus 0.8 per cent in British Columbia to plus 1.3 per cent in Alberta.

The good news for Manitoba is that April's rate was an improvement from March, when it had far and away the highest annual rate in the country, at 2.3 per cent.

As was the case in March, two of the consumer items that have seen some of the biggest increases in cost over the past 12 months are passenger vehicle registration fees (up 29.4 per cent) and homeowners' home and mortgage insurance (up 13.5 per cent). Other big gainers in April were cigarettes (up 8.4 per cent from a year earlier) and telephone services (up 8.3 per cent).

Vehicle registration fees and homeowners' home and mortgage insurance are costlier this year because of the NDP government's decision last year to boost vehicle registration fees by $35 and to extend the provincial sales tax to include some items, including home and mortgage insurance.

This year's budget, unveiled last month, also included a hike in provincial cigarette taxes.

A steep decline in the price of gas last month pushed Canada's inflation rate down to its lowest level since October 2009. It was a bigger drop than analysts had expected.

Gasoline prices at the pump in April were down six per cent from a year earlier, also the largest year-to-year decline 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 even below the low end of its one to three per cent range.

Despite a report earlier this week from a former Bank of Canada adviser, Paul Masson, that interest rates need to rise to avert long-term distortions to the economy, particularly in the debt and house prices, TD Bank said the central bank is likely to stay on the sidelines until late next year at the earliest.

Capital Economics analyst David Madani went further, saying it was time for the bank to drop its nominal tightening bias, language designed to warn markets there is very little chance of further cuts to rates.

-- The Canadian Press

 

Republished from the Winnipeg Free Press print edition May 18, 2013 B11

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