The annual pace of inflation jumped higher in March due in large part to a plunge in prices a year ago at the start of the pandemic.
Statistics Canada said Wednesday the consumer price index in March was up 2.2% compared with a year ago.
The increase compared with a 1.1% year-over-year increase in February, which was then a pandemic-era high.
The figures for March marked a new high, but one that saw prices compared against a year ago when the first wave of Covid-19 crashed on Canada’s shores.
March gas prices, for example, were up 35.3% compared with the same month last year when prices reached a four-year low at the onset of the pandemic.
Statistics Canada said about one-fifth of the increase in gasoline prices was due to the comparison with prices in March 2020.
Excluding energy prices, headline inflation would have been softer, clocking in at 1.1% year over year.
“For many Canadians, inflation doesn’t feel quite as weak as the news would suggest,” wrote TD senior economist James Marple.
“Canadians have shifted consumption toward shelter, which has been increasing in price, and away from clothing and recreation, which has fallen.”
The effect for gasoline should translate over into other areas of the index. The statistics agency said that when there are large drops in prices in the year-ago period, as was seen at the onset of the pandemic, it can push up headline inflation in the current month.
In its report on the consumer price index Wednesday, the agency said this effect should continue for the next few months.
CIBC senior economist Royce Mendes said it’s likely that the inflation reading for April will touch 3% when prices are compared with weak levels seen during the worst of the pandemic.
“Given the fact that the surge in headline inflation is simply due to base effects, the Bank of Canada will look through the recent acceleration and continue to focus on the support still needed for the labour market,” he wrote in a note.
Statistics Canada said 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 1.93% for March.
That’s the highest the average has been since it had the same reading in January 2020.
The Bank of Canada targets an inflation rate of 2% and plans to keep its key interest rate at 0.25% until the economy is back on its feet and inflation back on target.
Mortgage interest costs declined 6.3% year over year, Statistics Canada says, as rates have dropped on the back of the central bank’s actions.
Statistics Canada said homeowner replacement costs, which are linked to the price of new homes, rose 7.9% between March 2020 and last month, marking the largest yearly increase since December 2006 when it was 8.2%.
As well, food prices were up 11.4% year over year in March, Statistics Canada said.