Lower Gas Prices Slow Annual Inflation Rate to Bank of Canada's 2% Bull's-Eye

By Blatchford, Andy | The Canadian Press, July 17, 2019 | Go to article overview

Lower Gas Prices Slow Annual Inflation Rate to Bank of Canada's 2% Bull's-Eye


Blatchford, Andy, The Canadian Press


Canadian inflation slows on weak gas prices

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OTTAWA - Canada's price picture softened to two per cent last month following a sharp drop in gasoline prices compared to a year ago.

The annual inflation number for June hit the Bank of Canada's ideal target as it came down from 2.4 per cent in May, Statistics Canada said Wednesday in a new report. It marked the first move lower after four straight months of a rise in the year-over-year change.

The two per cent reading -- right at the mid-point of the Bank of Canada's range of one to three per cent -- doesn't put immediate pressure on governor Stephen Poloz to adjust his key interest rate.

Leaving out gas prices, Statistics Canada said last month's annual inflation number was 2.6 per cent.

The 9.2 per cent, year-over-year drop in pump prices was partly due to rising inventory levels in the United States and Alberta's elimination of its carbon pricing measures at the end of May, Statistics Canada said.

Energy prices fell in every province, with Alberta easily seeing the largest decrease compared with a year earlier. Nationally, the cost of energy dropped 4.1 per cent.

In addition to weaker gas prices, consumers also paid less last month for internet services, digital equipment and traveller accommodation.

Prices showed strength in other areas -- led by a 17.3 per cent increase in the cost of fresh vegetables. The report said fresh vegetables saw their biggest price acceleration since January 2016, an increase likely caused in part by poor weather in farming regions.

Consumers also shelled out more in June for auto insurance, mortgage borrowing costs, vehicle purchases and rent.

"As has been so often the case in recent times, gasoline was the swing factor," BMO chief economist Doug Porter wrote in a research note to clients.

"Notably, inflation can't really be described as 'tame' when one drives away from the gas station."

The average of Canada's three gauges for core inflation, which are considered better measures of underlying price pressures by omitting volatile items like gasoline, decelerated slightly to 2. …

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