Canadian price inflation accelerated in March at the fastest pace in over two years, pushed especially by increases in gas and food prices.
Statistics Canada announced Tuesday that the country’s annual inflation rate surged by 1.1 points to 3.3 per cent last month, the first time the rate has topped three per cent since September 2008, on the eve of the recession.
The month-over-month increase was also 1.1 per cent, and even core inflation, which is closely watched by the Bank of Canada, almost doubled to 1.7 per cent.
With the price of oil skyrocketing past US$100 a barrel, and most of the rest of the world suffering through bouts of inflation, Canada’s consumer price index was widely expected to see a large gain in Tuesday’s report.
But few expected the leap would be so high. Only last week, the Bank of Canada predicted inflation would reach three per cent sometime this spring — that target has now been already surpassed, and may be once again in April if the price of oil does not moderate.
In its analysis, the central bank said it believed high inflation would be a short-term phenomenon and declined to raise interest rates in response. The bank has a mandate to keep inflation within a one-to-three per cent range, and as close to two per cent as possible.
The March report, if it is followed up by outsized gains in the next two months, could convince the bank that it needs to start tightening monetary policy soon, however.
Energy prices, particularly gasoline, were the main contributors to both the annual inflation gain and the sharp one-month increase in prices.
Gas prices were 18.9 per cent higher in March than a year ago, fuel oil and other fuels surged 31.3 per cent, electricity costs increased by 4.3 per cent, and transportation costs, which have a heavy gasoline component, were up 6.6 per cent.
If energy were taken out of the calculation, inflation would have risen to only 2.4 per cent on an annual basis.
But other items also contributed to the prices jump. In fact, there were few exceptions.
Food prices, which has been rising sharply in the emerging world, increased 3.3 per cent in March as the price for fresh vegetables rose by 18.6 per cent and meat rose by five per cent. The agency said cold weather in Mexico and the southern U.S. was mostly responsible for the price spike for vegetables.
Shelter costs, with the exception of mortgage interest, recreation, household operations, health and personal care, alcohol and tobacco, even clothing and footwear, normally downward contributors to inflation, were all higher in March than last year, although the gains were more modest.
The few outliers were computer equipment and supplies, which were 9.9 per cent lower, video equipment, down 10.4 per cent, along with fresh fruit and natural gas.
Regionally, Nova Scotia had the highest inflation rate of any province in Canada at 3.9 per cent, followed by Ontario at 3.6 per cent and Quebec at 3.3. Annual inflation was lowest in Alberta at two per cent.