The inflation rate in Alberta grew at a faster pace in February than the Canadian average.
A report released Wednesday by Statistics Canada said the Consumer Price Index in the province was up 0.6 per cent from the previous month and by 2.5 per cent year-over-year.
Nationally, CPI rose 2.2 per cent from a year ago and 0.4 per cent month-over-month.
The federal agency said it is closely monitoring possible impacts of the novel coronavirus (also known as COVID-19) on Canada’s Consumer Price Index.
“Crude oil prices have declined amid lower demand due to a slowdown in global economic activity and travel. Additionally, tensions between oil-producing nations are expected to lead to an increase in supply. These factors contributed to a price decline in early March, and could result in lower consumer gasoline prices in the coming months,” it said.
“Because of these factors, as well as supply chain disruptions for consumer goods, temporary closures of some stores and service providers, the recent lowering of interest rates and the recent slowing of economic activity, the price effects of the outbreak could be more deeply felt in subsequent months.”
On a year-over-year basis, prices for gasoline rose less in February (+7.0 per cent) than in January (+11.2 per cent), reflecting lower crude oil prices amid lower global demand following the COVID-19 outbreak at the end of January. Likewise, consumers paid 1.3 per cent less for fuel oil and other fuels, following an 8.1 per cent increase in January, said StatsCan.
“Prices for fresh fruit and vegetables rose 1.6 per cent in February, the smallest year-over-year increase since June 2018. Consumers paid less for oranges, reflecting lower farm prices for Florida oranges due to a decline in demand. Prices for apples continued to fall amid a North American oversupply due to foreign trade restrictions on American apples.”
Douglas Porter, Chief Economist with BMO Economics, said Canadian inflation trends were essentially right on target just before the virus intruded.
“This will almost certainly be the last time we will see two per cent inflation for an extended period of time. In that environment, the Bank of Canada has a free hand to do what it takes to support the economy; first step would be another 50 bp cut in the overnight rate,” he said.
Royce Mendes, an economist with CIBC Economics, said lower oil prices will have inflation decelerating further in March.
“Other categories including, but not, limited to airfares, hotels, restaurants, and clothing stores are also likely to weaken in the next report as the effects of COVID-19 show up more clearly. While there will be a slight offset from a weaker Canadian dollar, that won’t have any impact on the thinking at the Bank of Canada, unless trading in the currency becomes disorderly. Instead, the Bank will be focusing on supporting activity to minimize as much as it can the drag on inflation from increasing economic slack.”
