Canada’s annual inflation rate fell to the lowest level in more than three years to 0.8 per cent in November, as weak economic conditions took the steam out of gasoline prices and car dealers offered deals to attract customers.
Economists had been expecting a smaller decline of two-tenths of a per cent. They knew lower gasoline prices in November would be a factor, but the 5.7 per cent drop-off at the pump was even steeper than estimated.
As well, the agency said automobiles cost 1.8 per cent less last month than they did in November 2011, mainly due to rebates dealers have put in place.
On a monthly basis, Statistics Canada’ basket of goods it measures cost 0.2 per cent less than it did in October.
Statistics Canada also reported Friday that Canada’s gross domestic product grew slightly in October — the first time since July. There was no growth in September and a 0.1 per cent decline in August.
Real GDP — which adjusts for inflation — edged up 0.1 per cent in October, the first month of the fourth quarter. Most economists expect growth in the October-December period will be better than in the third quarter, but still relatively weak.
Canada’s annual rate of inflation is the lowest since October 2009, a time when Canada was just emerging from the steep recession that had wiped out inflation as prices for many goods and services plunged.
The current situation, while an indication of weak global economic conditions, is unlikely to be as much of a concern as the political impasse in Washington.
The Republican-dominated lower house of Congress and President Barack Obama haven’t found a compromise to avert a range of automatic tax increases and spending cuts set to take effect early in the new year if there’s no deal.
The Canadian dollar dropped 0.61 of a cent to 100.68 cents US as the Republican leader in the House of Representatives, John Boehner, told reporters that it will be difficult for the two sides to bridge the gap between their positions.
In Canada, the economy has weakened this year due to several factors — many related to trade — leaving inflation weak. That reduces the possibility that the central bank will be raising its key lending rates any time soon.
The Bank of Canada’s core inflation rate – which excludes the volatile energy component and is regarded a truer indicator of underlining price pressures – was 1.2 per cent in November.
That was down 0.1 per cent from October and still within the central bank’s acceptable range of between one and three per cent, although well below its ideal target of two per cent annual inflation.
On a year-to-year basis, gasoline prices in Canada were at about the same level in November, whereas in October they were four per cent higher.
In an accompanying note, Statistics Canada said it had adjusted how it measures the passenger vehicle index to better reflect manufacturers’ marketing strategies for new models, but the change would not have altered the result for November. The agency said it will make further modifications in March.
While prices continued to rise on most items, the pace of increase slowed in March for many. Food rose at a moderate 1.7 per cent despite a 4.3 per cent bump for meat, and shelter costs rose by a tepid one per cent.
There were also outright declines. Fresh vegetables were 5.8 per cent less expensive in November than a year ago, mortgage interest costs were three per cent lower, natural gas fell 6.8 per cent, video equipment 12.7 per cent, transportation 0.2 per cent, and clothing and footwear 0.6 per cent.
On a monthly basis, prices were lower on gasoline, clothing, electricity, hotel rates and mortgage interest costs.
Regionally, inflation was highest in Prince Edward Island and Quebec at 1.5 per cent, and lowest in British Columbia, at a barely visible 0.1 per cent.