Decline in gas prices affecting inflation rate
Consumer price picture still ‘tame’ but it’s a mixed bag, notes economist
Consumer prices in the Calgary region and across Alberta were on the rise in April, according to Statistics Canada.
The federal agency reported Friday that the Consumer Price Index in the province was up 0.7 per cent from a year ago, while it rose by 0.8 per cent in the Calgary area.
Todd Hirsch, chief economist with ATB Financial, said the inflation rate is being affected by the year-over-year decline in gasoline prices as well as natural gas and electricity.
“Those things bounce around month to month. So you don’t want to look too much into that but I think probably we’re also starting to see some of the higher prices again for fresh fruits and vegetables and anything we have to import from the United States,” he said. “On balance, the consumer price inflation is still very, very tame but it’s a bit of a mixed bag. You’re see- ing inflation on certain things and deflation on other things.
“I don’t think the inflation numbers have much bearing on what’s going on in Alberta’s economy right. I don’t think we’re seeing low inflation because the economy is weak. I don’t think that’s what’s driving it. Normally if you see low inflation you can kind of deduce that the economy is doing poorly. What’s driving it are these gasoline prices, natural gas and electricity.”
Year-over-year increases in Alberta were for food (3.8 per cent), shelter (0.4 per cent), household operations, furnishings and equipment (2.8 per cent), recreation, education and reading (0.8 per cent), and alcoholic beverages and tobacco products (4.8 per cent).
Annual declines were in clothing and footwear (0.4 per cent), transportation (3.1 per cent) and health and personal care (0.1 per cent).
Statistics Canada reported that nationally, “gasoline prices were down 21.0 per cent in April compared with the same month a year
earlier, after registering a 19.2 per cent year- over-year decline in March. In addition, fuel oil prices decreased 20.0 per cent year over year in April, following a 15.2 per cent decline in March.”
“Given the subdued economic backdrop, persistently elevated core inflation isn’t particularly troubling for the Bank, especially with their view on underlying inflation. (Friday’s) data will do little to change the Bank of Canada’s tone at next week’s policy announcement,” said Benjamin Reitzes, senior economist with BMO Capital Markets.
Jonathan Bendiner, economist with TD Economics, said further softness in inflation is expected over the next two quarters “until the base effect from lower oil prices runs its course.”
“That said, core inflation is expected to remain above the two per cent mark, partially buoyed by a lower Canadian dollar. While the loonie has gained ground in recent weeks, it still remains well below year ago levels and it typically takes four to eight quarters for pass-through effects from higher import prices to be felt,” he said.