Consumer prices in Canada jumped by a surprisingly strong 1.2 per cent in February as a big increase in gasoline helped fuel the biggest month-to-month price differential since January 1991.
The one-month spurt lifted the country’s annual inflation rate by 0.7 points to 1.2 per cent in February, reversing a trend to lower price gains that had taken the consumer price index to 0.5 per cent in January, the lowest level in more than three years.
Economists had expected inflation to start edging up, particularly as gasoline prices were known to have risen, but their best estimate was for a year-to-year increase of 0.8 per cent and a month-to-month increase of 0.7 per cent.
The Canadian dollar was up 0.13 of a cent to US98.52 cents after the report.
The higher prices, while not good news for consumers, are in line with the Bank of Canada’s efforts to keep inflation as close as possible to 2.0 per cent — the mid-point of its target range.
A prolonged period of below trend inflation is an indicator of soft domestic demand, which at its worst, could weaken the economy by encouraging consumers to delay purchases in expectation of lower prices in the future.
Gasoline prices had a month-over-month increase of 8.4 per cent in February after declining in January. Prices at the pump last month were also 3.9 per cent higher than in February 2012, contributing to a two per cent overall gain in the cost of transportation.
Statistics Canada said there were also increases in most other categories, helping lift the Bank of Canada core inflation index by almost half a point to 1.4 per cent. Economists had expected the core rate to remain at 1.0 per cent.
Besides gasoline, dealer auto prices rose 2.1 per cent, clothing increased by five per cent, fresh vegetables 6.4 per cent and travel accommodation 4.5 per cent.
On an annual basis, passenger vehicles cost 2.5 per cent more last month than February 2012, after declining 0.8 per cent in January as fewer manufacturers’ rebates were offered during the month. Restaurant meals were up 2.2 per cent, food 1.9 per cent, rent 1.6 per cent, homeowner replacement cost was up 2.3 per cent, and alcohol and tobacco increased by two per cent.
The agency said inflation rose at a faster pace last month in all of Canada’s 10 provinces, with Newfoundland and Labrador topping the list at 2.3 per cent.
In a separate release, the agency said average weekly earnings of non-farm payroll employees edged up 0.1 per cent in January and were 2.7 per cent higher from last January.
Not all items saw increases in prices, however. With interest rates remaining a rock-bottom levels, mortgage interest costs were down 4.2 per cent in February from a year ago, video equipment cost 10.2 per cent less, children’s clothing was 6.5 per cent lower and digital computing equipment and devices were 5.1 per cent cheaper.