Canada’s annual inflation rate slowed in January but grocery prices remain high

Business

Published 21.02.2023

Canada’s annual inflation rate slowed in January but grocery prices remain high

OTTAWA –

The annual inflation charge slowed greater than anticipated in January, suggesting the Bank of Canada will keep on with its resolution to pause rate of interest hikes as an overheated economic system cools.

In its client worth index report launched Tuesday, Statistics Canada stated the deceleration in headline inflation to to five.9 per cent in January from 6.3 per cent in December displays a base-year impact.

A base-year impact refers back to the influence of worth actions from a yr in the past on the calculation of the year-over-year inflation charge.

Given a lot of the acceleration in worth progress occurred within the first half of 2022 as the specter of Russia invading Ukraine become a actuality, the federal company stated the annual inflation charge will proceed to gradual within the coming months.

The final time Canada’s annual inflation charge was under six per cent was in February 2022 when it was 5.7 per cent.

The headline charge got here in decrease in January than many business banks had been anticipating of their forecasts, signalling good news for the Bank of Canada.

Last month, the Bank of Canada hiked its key rate of interest for the eighth consecutive time since March 2022, bringing it from close to zero to 4.5 per cent. That’s the best it has been since 2007. At the time, the central financial institution stated it could take a “conditional” pause to evaluate the consequences of upper rates of interest on the economic system.

In an interview, BMO chief economist Douglas Porter stated the optimistic shock was “very welcome,” however famous a number of the decline in headline inflation needed to do with one-off occasions. For instance, costs for mobile providers had been down due to prolonged Boxing Day gross sales.

“On balance, this slightly takes the pressure off of the Bank of Canada,” Porter stated, including that an rate of interest hike in March is most definitely off the desk.

But Canadians skilled no slowdown in the price of groceries final month as costs rose quicker on a year-over-year foundation.

Grocery costs had been up 11.4 per cent in contrast with a yr in the past, marking an acceleration from 11 per cent in December. The federal company stated costs for meat, bakery items, and greens all rose quicker.

Porter stated the meals inflation was the “one piece of bad news” within the January inflation report.

The chief economist careworn that hovering grocery costs is a world phenomenon, noting it’s “not a Canadian story alone.”

Some components enjoying into this, he stated, embody avian flu affecting poultry merchandise and the warfare in Ukraine affecting vegetable oil and grain costs.

On a month-to-month foundation, greater gasoline costs in January drove the general worth stage greater in contrast with December. The federal company stated the buyer worth index rose 0.5 per cent in January after declining by 0.6 per cent a month prior.

Here’s what occurred within the provinces (earlier month in brackets):

Newfoundland and Labrador: 5.5 per cent (5.7)

Prince Edward Island: 7.0 per cent (7.7)

Nova Scotia: 6.9 per cent (7.6)

New Brunswick: 6.5 per cent (6.3)

Quebec: 6.2 per cent (6.3)

Ontario: 5.6 per cent (6.0)

Manitoba: 6.9 per cent (8.0)

Saskatchewan: 6.0 per cent (6.7)

Alberta: 5.0 per cent (6.0)

British Columbia: 6.2 per cent (6.6)

The company additionally launched charges for main cities, however cautioned that figures might have fluctuated extensively as a result of they’re based mostly on small statistical samples (earlier month in brackets):