The annual pace of inflation in Canada posted its biggest one-month decline in more than a decade, dropping below 1% in March as the price of oil collapsed and the economy was first gripped by the Covid-19 pandemic.
Statistics Canada said Wednesday the consumer price index for March was up 0.9% compared with a year ago, the smallest year-over-year increase since May 2015 — also a period of low oil prices.
The drop from a year-over-year increase of 2.2% in February was the largest drop since September 2006.
Economists on average had expected a reading of 1.2% for March, according to financial markets data firm Refinitiv.
Bank of Montreal chief economist Douglas Porter said the slowdown in Canada was bigger than those in some other major economies, including the United States and United Kingdom.
“Canadian inflation hit the brakes hard at the start of the shutdowns,” Porter wrote in a report.
And Porter said to look for inflation to fall even further in coming months with “a trip into negative terrain likely for a spell.”
The economy ground to a halt last month as governments ordered the closure of non-essential businesses in an effort to slow the spread of Covid-19.
The reading on inflation follows the March jobs report earlier this month that indicated that the economy lost more than one million jobs last month.
A preliminary estimate by Statistics Canada has also suggested the economy contracted by an unprecedented 9% in March.
“Inflation is the least of anyone’s concerns at the moment, but it is notable that the mandated closure of large swathes of the economy in late March is having a profound effect on price growth,” TD Bank senior economist James Marple wrote.
“This is yet another data series showing unprecedented movements and which will continue to do so at least through the month of April.”
The collapse in the annual pace of inflation came as energy prices fell 11.6% on a year-over-year basis in March, driven by the largest one-month price decline since November 2008.
Statistics Canada said drivers paid 21.2% less for gasoline compared with March last year due to low crude oil prices, which also resulted in a 9.5% drop in the price of fuel oil and other fuels and an 18.5% drop in the price for fuel, parts and accessories for recreational vehicles.
Excluding energy, the consumer price index rose 1.7%.
The average of Canada’s three measures for core inflation, which are considered better gauges of underlying price pressures and closely tracked by the Bank of Canada, was 1.83% in March compared with 1.97% for February.