The Chronicle Herald (Provincial)
National inflation rate goes negative
OTTAWA — Canada's annual inflation rate fell by 0.2 per cent in April, the first time it has turned negative since 2009, as the coronavirus pandemic slashed energy prices, but the headline figure obscured rising costs of some foods.
Analysts had forecast a negative rate of 0.1 per cent in April, down from 0.9 per cent recorded in March.
Statistics Canada said on Wednesday that annual inflation excluding energy prices rose by 1.6 per cent.
Energy prices sank by 23.7 per cent from April 2019. Gasoline prices plunged 39.3 per cent, the largest yearover-year decline on record, on lower global demand for oil and a production war between Russia and Saudi Arabia.
But food prices rose by 3.4 per cent in April from the year-earlier period, pushed up by demand for staples like rice (+9.2 per cent), eggs (+8.8 per cent) and margarine (+7.9 per cent). On a monthly basis, household cleaning products posted a 4.6 per cent gain.
"Prices for essentials matter more at this stage," noted Josh Nye, senior economist at RBC Economics. "In that sense, an increase in food prices in April likely hurts more than a drop in gasoline prices helps."
The Canadian dollar pared its rise, touching 1.3891, or 71.98 cents U.S., after the data.
The last time Canada recorded a negative annual inflation rate was in September 2009, when prices fell by 0.9 per cent.
"This is not at all reflective of the pricing environment that consumers are actually facing," said Royce Mendes, senior economist at CIBC Capital Markets. "What people were buying was food, household cleaning products."
The Bank of Canada, which has slashed its key interest rate to near-zero, predicted last month that inflation would hit near zero per cent in the second quarter as a result of falling energy prices.
The CPI common measurement, which the central bank says is the best gauge of the economy's underperformance, dipped to 1.6 per cent from 1.7 per cent.