Canada consumer prices post fastest monthly gain since 1991

Posted March 27, 2013, at 5:29 p.m.

OTTAWA — Canadian consumer prices rose at the fastest monthly pace in more than 20 years in February on higher prices for gasoline and clothes, as the nation’s inflation rate rebounded from three-year lows.

Consumer prices rose 1.2 percent in February, the biggest monthly gain since January 1991 when the country implemented a new sales tax, following a 0.1 percent increase the previous month, Statistics Canada said Wednesday. From a year earlier, prices were also up 1.2 percent, the highest since October, following a 0.5 percent gain in January.

Economists and investors have been pushing back expectations for higher interest rates as stagnant inflation lessens the Bank of Canada’s impetus to tighten monetary policy. Inflation has been below the central bank’s 2 percent target for 10 straight months.

“All in all, we still have inflation numbers in Canada that are well-contained,” said Camilla Sutton, chief currency strategist at Scotiabank in Toronto. “The firming is somewhat positive but it doesn’t throw us into a new area” in terms of central bank policy.

The inflation figures “were much firmer than anticipated across the board,” Sutton said.

Governor Mark Carney said March 6 the current overnight lending rate will be appropriate “for a period of time” because of “material excess capacity” in an economy where fourth-quarter growth slowed to a 0.6 percent annualized pace.

Economists surveyed by Bloomberg earlier this month projected the overnight rate will remain at 1 percent until the third quarter of 2014.

The annual core inflation rate, which excludes eight volatile items, accelerated to 1.4 percent from 1 percent in January, the Ottawa-based agency said. On a monthly basis, core prices rose 0.8 percent, the biggest gain since at least 1984, when Statistics Canada records begin.

In its last update of economic projections in January, the Bank of Canada forecast core inflation would average 1.4 percent in the first quarter of 2013 before rising to 1.9 percent at the end of the year.

Economists surveyed by Bloomberg News predicted total inflation on a year-over-year basis would accelerate to 0.8 percent and the core rate would be 1 percent, according to median estimates. The monthly gain was estimated at 0.7 percent for total inflation, and 0.3 percent for core.

Gasoline prices jumped 8.4 percent in February, the largest monthly increase since May 2008, while clothing and footware prices jumped 4.0 percent. The cost of buying cars jumped 2.1 percent during the month as manufacturers scaled back discounts.

On an annual basis, food prices rose 1.9 percent, accelerating from a 1.1 percent pace in January.

On a seasonally adjusted basis, consumer prices rose 0.7 percent in February, compared with the 0.5 percent gain forecast by economists. The core seasonally adjusted rate was 0.4 percent, with economists projecting a 0.1 percent gain.

In a separate report, Statistics Canada said average weekly earnings of Canadian non-farm payroll employees rose 2.7 percent in January from a year earlier.

On a monthly basis, earnings rose 0.1 percent to C$908.19 ($891.50). The average workweek was 33.0 hours in January, unchanged from December and up from 32.9 hours a year earlier.

Payroll employment was 15.32 million in January, up 0.1 percent from a month earlier and an increase of 1.6 percent from a year earlier.

 

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