OTTAWA — The pace of inflation in Canada eased to an annual rate of two per cent last month as the prices of most consumer goods either saw a moderation in growth or outright declines from last year.
After a surprising spurt in October to an annualized rate of 2.4 per cent, inflation as measured by the consumer price index now appears headed back to moderate levels.
And November’s figures from Statistics Canada also likely eliminated whatever concern Bank of Canada governor Mark Carney might have had that keeping interest rates at such historic lows much longer would trigger a sharp rise in prices.
November also reversed a trend of rising inflation that had been established since July, when Ontario and British Columbia introduced the harmonized sales tax.
“The big question after the surprise pop (in October) was whether it was a one-month fluke, or the start of a new higher trend for inflation,” said Douglas Porter, deputy chief economist with BMO Capital Markets.
“Today’s report emphatically says one-month fluke.”
“This docile report will quell talk of a rate hike by the Bank of Canada in early 2011, especially in combination with the meagre one per cent gross domestic product growth seen in the third quarter,” Porter added.
CIBC’s Krishen Rangasamy noted that the much-watched underlying core inflation index also fell four-tenths of a point to 1.4 per cent, the lowest in two years.
The only sign of inflation was in the monthly measure. Prices edged up slightly, by 0.1 per cent, from October to November. But that was well below the 0.4 per cent jump seen in October.
“Clearly, Canada does not have an inflation problem, and the Bank of Canada can justify waiting until mid-year to resume the tightening cycle,” Rangasamy said.
November’s survey of consumer items showed that prices were higher than November 2009 on many key goods, including food, gasoline, electricity and homeowner replacement costs, but not up as much as in the previous month.
Gasoline prices were up 7.2 per cent year over year, but still less than the 8.8 per cent gain reflected in the October numbers.
Food prices were up 1.5 per cent, new passenger vehicles prices by 3.9 per cent and homeowner replacement costs by 4.6 per cent, again all lower than the pace seen the previous month.
And some goods, such as vegetables, clothing, non-alcoholic beverages and mortgage interest were all lower than last year.
Fresh vegetables prices fell 4.4 per cent, mortgage interest costs dropped 2.7 per cent, women’s clothing by 6.9 per cent, video equipment by 14.8 per cent and furniture by 2.9 per cent from last year.
Regionally, inflation moderated in all provinces. Ontario still had the annual highest rate of inflation at three per cent, while Alberta was the lowest at 0.1 per cent.