Canada’s annual rate of inflation slowed more than economists expected in January, with prices rising 2.9 per cent, as food price growth slowed and gas prices fell.
Economists had expected the Consumer Price Index (CPI) to dip from 3.4 per cent in December to 3.3 per cent in January, according to Reuters.
Statistics Canada said on Tuesday that January’s annual deceleration was driven by lower year-over-year prices for gasoline. Excluding gasoline, the Consumer Price Index (CPI) slowed to 3.2 per cent in January.
Gas prices fell 4 per cent in January on an annual basis, largely due to a base-year effect that saw higher gas prices last year due to refinery closures in the southern United States.
Food prices continued to rise at a slower rate, with grocery store prices increasing 3.4 per cent in January. Statistics Canada said the deceleration of grocery prices was broad-based, with meat (up 2.8 per cent), dairy products (up 1.5 per cent), bakery products (up 4 per cent) and fresh fruit (up 1.9 per cent) contributing to the slower year-over-year increase.
Prices fell in five of the eight components on a monthly basis. Health and personal care stayed flat with a 3.7 per cent increase, while shelter costs accelerated from a 6 per cent rise in December to 6.2 per cent in January.
On a monthly basis, CPI was unchanged in January, following a 0.3 per cent decline in December. Seasonally adjusted, CPI fell 0.1 per cent, the first decline since May 2020.
“Overall, it appears that the sluggishness in consumer demand is finally impacting pricing in areas of more discretionary spending,” CIBC economist Andrew Grantham wrote in a research note on Tuesday.
“That is a positive sign for the Bank of Canada, and will have financial markets pulling forward expectations for a first interest rate cut today, which we see being delivered in June.”
More to come.
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
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