Yellowknife's consumer prices are falling for the first time in more than a decade

The plummeting price of fuel is driving consumer prices downward in Yellowknife for the first time in more than a decade, according to new data from Statistics Canada.

A drop in consumer prices may sound like a good thing — but historically, falling prices have been a sign of economic trouble, and analysts say the trend for the N.W.T. looks particularly bleak.

The consumer price index measures the prices of common household expenses against a benchmark of 100 points set in 2002. Since then, consumer prices in Yellowknife have risen by 38 points, close to the national average of 36.

But compared to May 2019, consumer prices are down a full point on the index, and have dropped 2.5 points since February of this year.

The consumer price index has only recorded back-to-back months where consumer prices have fallen one other time in the N.W.T. capital — during the 2009 financial crisis.

The drop is driven by plummeting energy prices, which had fallen nearly 23 per cent since their all-time high in December of last year.

Compared with May 2019, the price of gasoline has fallen 32 points to 110.8 on the index, and other fuel prices have fallen by more than 40 points, to 155.7. This time last year, they stood at 260 on the index.

Prices for personal care services and clothing products also recorded significant year-on-year declines.

Rest of country rebounding already

Nationally, many provinces and territories recorded similar drops in consumer prices during the COVID-19 pandemic, with the most severe in the Atlantic provinces, Saskatchewan, and Ontario. But in many of those places, prices are already on the rebound after steep drops last month.

Outside of the territories, only Nova Scotia recorded back-to-back declines.

In the North, the index only captures prices in the territorial capitals. In Iqaluit, consumer prices fell by 0.5 points against May 2019, and a full point compared to last month. Prices there have been falling since March.

In Whitehorse, consumer prices fell by 0.4 per cent from April to May, though the territory is still up overall compared to May 2019. Drops in the cost of energy offset increases in food and gasoline prices.

N.W.T. faces worse outlook than other territories

Despite these drops, the Conference Board of Canada says Nunavut and Yukon are likely to weather the storm caused by the COVID-19 pandemic with relative ease, thanks to strong mining sectors uninterrupted by the global pandemic.

"The industry remains largely intact at this point, which will allow the territories to mostly avoid the steep contractions that are being seen in other parts of the country," the report reads.

Yukon is still expected to record its strongest growth in over a decade. Driven by high gold prices and new mines, the territory's economy is estimated to grow by nine per cent — a major drop from pre-pandemic estimates of nearly 14 per cent, but historic nonetheless.

By 2024, Yukon's GDP from mining is expected to double, driving an overall increase of close to 20 per cent. It's unemployment numbers are also expected to remain low, even with layoffs due to COVID-19.

"Despite the ongoing pandemic and higher unemployment rate, the territory will post a net gain of nearly 800 jobs this year," the report reads.

That picture is very different in Nunavut. There, 1,200 jobs are expected to be lost because of the pandemic, and aren't anticipated to return by the end of 2021. Unemployment could rise to 19 per cent, and is already the highest in Canada.

But the health of the mining sector will mean the impact on GDP will be negligible, with the territory expected to record another two years of high growth above five per cent.

N.W.T. economy expected to 'struggle'

For the N.W.T., the picture is altogether more bleak. It's the only territory expected to see a contraction of its economy this year, of more than three per cent. The mining economy has peaked, the report says, and the pandemic is expected to spike unemployment to its highest level on record.

Some 900 jobs of about 1,200 lost are expected to return when the pandemic passes. But in subsequent years, employment is expected to remain largely static.

"We expect the Northwest Territories' economy to struggle to gain traction over the next few years," the report reads.

From 2022 to 2024, "lower unemployment rate[s] will be the result of a shrinking labour force due to flat population growth and people retiring," the report reads. 

"This is bad news for the territory over the next five years."