January annual inflation rate cools: StatsCan
Canada's annual inflation rate eased slightly in January, coming in at 1.1 per cent. That was down from the 12-month increase of 1.2 per cent recorded in December.
Statistics Canada says consumers paid less for gasoline and to buy or lease passenger vehicles.
"Inflation is now about as menacing to Canada as Luxembourg’s navy." — BMO Capital Markets economist Douglas Porter
Gasoline prices in January 2009 were 23.5 per cent below the level in the same month in 2008.
Dealer incentives helped bring down prices on purchased and leased cars. The cost of purchasing and leasing passenger vehicles fell 8.2 per cent compared with a year earlier, a sharper decline than the 3.5 per cent year-over-year drop observed in December.
Higher food and shelter prices
Upward pressure on the annual inflation rate came from higher costs for food and shelter.
Food prices increased 7.3 per cent during the one-year period to January, identical to the increase in December. Higher prices were seen for bakery goods, cereal products and fresh vegetables.
Shelter costs rose by 3.3 per cent in the 12 months to January, pushed by higher mortgage interest payments and natural gas prices. The one-year shelter costs showed a moderating trend as January's increase was down from a 3.5 per cent rise seen in December and 3.9 per cent reported for November.
The Bank of Canada's core index — which factors out many of the more volatile inflation influences — increased 1.9 per cent over the 12 months to January, a slowdown from the 2.4 per cent rise in December. Lower prices for purchasing and leasing of passenger vehicles limited the increase in the core index.
On a seasonally adjusted month-to-month basis, consumer prices fell 0.1 per cent from December to January, following monthly declines of 0.3 per cent in December, 0.3 per cent in November and 0.6 per cent in October.
One economist said Canada currently has little to worry about when it comes to inflationary pressures.
"Inflation is now about as menacing to Canada as Luxembourg’s navy," said BMO Capital Markets economist Douglas Porter.
"With the economic downturn gathering force and commodity prices still reeling, inflation is poised to move decisively lower in the months ahead. A temporary dip into negative inflation readings looms in the spring. Excluding food — and who eats these days? — inflation is already negative," Porter wrote in a commentary.
TD Bank economist Grant Bishop said the drop in the core rate of inflation confirms the bank's opinion that the Bank of Canada will cut the target for the overnight rate by another half percentage point in March, reducing the key rate to 0.5 per cent.