Inflation Report

May 17 – Canada’s annual inflation rate fell to 0.4% in April from 1.0% in March due largely to a steep decline in the price of gasoline (-6.0% from a year ago). Prices for clothing and footwear, transportation, health care and recreation were all lower in April.

Higher costs for shelter and food were the main upward contributors to the rise in the Consumer Price Index. Shelter costs (including electricity and rent) increased 1.3% in the 12 months to April. Food prices increased 1.5%, lead by higher prices for meat (+3.2%).

Prices for goods, overall, fell 0.3% in the 12 months to April, while prices for services increased 0.9% year-over-year.

Consumer prices rose in eight of Canada’s 10 provinces. The exceptions were New Brunswick and British Columbia (-0.2% and -0.8%, respectively). The highest inflation readings were recorded in Prince Edward Island (+1.8%) and Manitoba (+1.8%).

The Bank of Canada’s closely watched core measure of inflation (which excludes the eight most volatile components of the CPI, like food and energy, as well as the effect of changes in indirect taxes) advanced 1.1% in the 12 months to April, following a 1.4% increase in March.

Sluggish economic growth has meant increased excess capacity in Canada’s economy, which has cooled inflation significantly. Heightened competitive pressures among retailers has also kept prices in check. This gives the Bank of Canada plenty of scope to remain on the sidelines in the near term.

Tina Kremmidas | Chief Economist | 416.868.6415 (222)