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Higher Gas Prices Push Canada's Inflation Rate To 1.9 Per Cent

Canada’s inflation rate shot up last month as Statistics Canada’s consumer price index rose more than half-a-point to 1.9 per cent, the largest increase in more than a year.

All the inflation indicators rose in January and all provinces experienced inflation, although Atlantic Canada had the biggest gains.

The Bank of Canada core index, which the central bank uses to gauge systemic inflation, rose to two per cent. And on a monthly basis, prices gained 0.3 per cent from December to January after falling the same amount the previous month.

The annual inflation rate has gone from minus 0.9 per cent to a positive 1.9 per cent in four months.

But economists, who had expected the inflation rate would rise in January, have said Bank of Canada governor Mark Carney is unlikely to read the sharp increase as an underlying trend that would cause him to raise interest rates before July.

That’s because Canada’s inflation story remains all about gasoline prices and is regarded as temporary – the aftermath of wild swings in world crude oil more than a year ago, when crude rose above US$147 a barrel in mid-2008 then fell precipitously in the following months.

At this time last year, oil prices were seeking a bottom as the global recession slashed demand.

Statistics Canada said the cost of filling your gasoline tank at the pump was 23.9 per cent higher this January than a year ago.

Excluding the important energy component, the inflation rate looked a little more tame at 1.3 per cent.

The wild swings will likely flatten out, the agency said, since “prices at the pump have been relatively stable since July 2009.”

Besides gasoline, the other main contributors to inflation last month came from car insurance, property taxes and eating out at restaurants.

Meanwhile, while the cost of mortgage interest, natural gas, women’s clothing and fresh vegetables fell.

But the key food component, which had been rising most of last year, has already come back to earth and advanced a meagre 1.4 per cent in January, the smallest in almost two years.

In the current low-interest environment, the amount Canadians pay on interest on their home mortgages remains a major source of disinflation, falling 5.5 per cent in January.

Property taxes, however, rose 4.3 per cent and rent 1.4 per cent.

Regionally, Statistics Canada said all provinces saw consumer prices increase last month, with Atlantic Canada experiencing the biggest gains ranging from 3.1 per cent in Nova Scotia to four per cent in Prince Edward Island.

The agency said gasoline prices were mostly responsible, with the year-over-year increases in Atlantic Canada’s inflation rate – with prices rising from 26.5 per cent in Newfoundland and Labrador to 35.6 per cent in New Brunswick.

British Columbia had the lowest annual inflation rate at 0.7 per cent.


The annual inflation rate was 1.9 per cent in January, Statistics Canada says. Here’s what happened in the provinces and territories. (Previous month in brackets):

Newfoundland and Labrador 3.2 (1.9)
Prince Edward Island 4.0 (3.0)
Nova Scotia 3.1 (2.6)
New Brunswick 3.9 (3.0)
Quebec 2.2 (2.1)
Ontario 1.9 (1.2)
Manitoba 1.7 (1.1)
Saskatchewan 1.6 (1.1)
Alberta 1.7 (0.8)
British Columbia 0.7 (0.4)
Whitehorse, Yukon 0.8 (-0.4)
Yellowknife, N.W.T. 2.2 (1.2)
Iqaluit, Nunavut -0.4 (-1.0)

The annual inflation rate was 1.9 per cent in January, Statistics Canada says. The agency also released rates for major cities, but cautioned that figures may fluctuate widely because they are based on small statistical samples (Previous month in brackets):

St. John’s, N.L., 3.0 (1.7)
Charlottetown-Summerside, 3.8 (2.9)
Halifax, 2.8 (2.5)
Saint John, N.B., 3.9 (3.2)
Quebec, 2.5 (2.4)
Montreal, 2.1 (2.0)
Ottawa, 1.9 (1.2)
Toronto, 1.8 (0.8)
Thunder Bay, Ont., 1.3 (0.3)
Winnipeg, 1.6 (1.0)
Regina, 1.9 (1.5)
Saskatoon, 1.4 (1.0)
Edmonton, 1.8 (0.8)
Calgary, 1.4 (0.2)
Vancouver, 1.0 (0.7)
Victoria, 0.5 (0.5)