In­fla­tion rate rises to 2.1% as car­bon poli­cies take hold

The Hamilton Spectator - - CANADA & WORLD - ANDY BLATCH­FORD

A surge in ga­so­line prices helped drive Canada’s an­nual in­fla­tion rate well be­yond ex­pec­ta­tions in Jan­uary to 2.1 per cent — an in­crease that co­in­cided with the im­ple­men­ta­tion of new car­bon­pric­ing poli­cies i n On­tario and Al­berta.

Statis­tics Canada said Fri­day the 6.3 per cent in­crease in trans­porta­tion costs was the main con­trib­u­tor to the higher in­fla­tion rate, with gas prices spik­ing by 20.6 per cent across the coun­try com­pared to the year be­fore.

The over­all in­fla­tion read­ing last month was stronger than De­cem­ber’s rate of 1.5 per cent, the agency’s lat­est con­sumer price in­dex said.

How­ever, ex­clud­ing ga­so­line, the Jan­uary in­fla­tion rate was also 1.5 per cent.

BMO chief econ­o­mist Dou­glas Porter said the dra­matic jump in pump prices was a com­bi­na­tion of the un­der­ly­ing strength in oil prices and the new car­bon levies that came into ef­fect last month in both On­tario and Al­berta.

“That was the big story as to why over­all in­fla­tion is now back above two per cent for the first time in a cou­ple of years,” Porter said.

In Al­berta, the an­nual in­fla­tion rate hit 2.5 per cent last month af­ter an in­crease of one per cent in De­cem­ber.

Gas prices in Al­berta soared 33.9 per cent last month, a gain that Statis­tics Canada says was partly at­trib­ut­able to a new car­bon levy in the prov­ince.

The agency said On­tario, which in­tro­duced a cap-and-trade pro­gram in Jan­uary, saw a 20.4 per cent year-over-year in­crease in gas prices last month.

TD se­nior econ­o­mist James Marple wrote in a note to clients that, when it comes to in­fla­tion, the in­flu­ence of the car­bon levies will be a fac­tor to watch go­ing for­ward. He doesn’t ex­pect the car­bon-levy in­creases to f all out of fu­ture data re­leases.

“Over time, sub­sti­tu­tion away from en­ergy prod­ucts should re­duce the im­pact of gains in en­ergy prices on in­fla­tion, but this will take time to show up,” he wrote.

Statis­tics Canada also found that year-over-year in­fla­tion rates were higher in ev­ery prov­ince last month com­pared to a year ear­lier.

Over­all, a con­sen­sus of econ­o­mists had pre­dicted 1.6 per cent in­fla­tion for Jan­uary, ac­cord­ing to Thomson Reuters.

Statis­tics Canada says con­sumers paid four per cent less at gro­cery stores last month com­pared to a year ear­lier.

The agency said the Bank of Canada’s three pre­ferred mea­sures for core in­fla­tion saw in­creases last month of 1.3 per cent, 1.7 per cent and 1.9 per cent.

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