Canada's annual inflation rate eases to 0.1% in May
Canada's annual inflation rate came in at 0.1 per cent in May, down from 0.4 per cent in April, owing to a year-over-year decline in energy prices, Statistics Canada said Thursday.
Gasoline prices fell 25.1 per cent from May 2008 to May 2009 following a 12-month decline of 24.7 per cent in April.
Food costs rose 6.4 per cent in the 12 months to May, following a 7.1 per cent increase in April.
Statistics Canada said the one-year rise seen in May was the slowest rate of growth since October 2008.
The Bank of Canada's core rate of inflation advanced two per cent over the 12 months to May, up from the 1.8 per cent rise posted in April.
One-month rise
While gas prices are lower compared to May 2008, Canadians paid more when May 2009 is compared to April 2009. On a month-to-month basis, gasoline prices rose 8.3 per cent from April to May.
The higher gas pump prices meant that, on a seasonally adjusted monthly basis, the overall consumer price index rose 0.2 per cent from April to May, after falling 0.2 per cent from March to April.
Some economists are skeptical about the possibility of the overall inflation rate turning negative, even with the economy in its weakened condition.
"With gasoline prices poised to post another increase of around eight per cent in June, Canada may never actually dip into an outright negative reading on headline inflation, and core trends are well above [Bank of Canada] expectations," said BMO Capital Markets economist Douglas Porter.
"The main message is that unless the Canadian dollar suddenly reaches for the stars again, this above-expected inflation reading further reduces the odds of the Bank of Canada embarking on quantitative easing," Porter said in a commentary.
Krishen Rangasamy of CIBC World Markets said Canada should see a few months where the year-over-year headline inflation rate "dips well into negative territory as we hit the one-year anniversary of the mid-2008 energy spike."
"But an outbreak of broader or sustained deflation is very unlikely, given what we’re seeing with core prices," Rangasamy said.