Source: The Canadian Press

Canadians paid more for energy, new cars and food last month, as prices rose two-tenths of a point and lifted the annual inflation rate to 1.9%.

It was the first time the rate had risen so high since January.

The increase in the annual rate, after a drop in August, had been expected given the recent run-up in oil prices, but economists stressed price pressures in Canada remain low.

They note that the underlying core index, which the Bank of Canada uses to assess the impact of inflation on the country, actually dropped slightly to 1.5%, well below the bank’s 2% target.

And the current rate is relatively elevated, because it is still absorbing the one-time impact of the new harmonized sales tax in Ontario and British Columbia, which the central bank estimates added 0.7 percentage points to overall price levels.

The effect of the HST premium was especially noticeable in Ontario, which at 2.9% had the country’s highest rate of inflation.

“The core consumer price index print provides further evidence that prices are well under wraps in Canada,” said CIBC economist Krishen Rangasamy.

If anything, core inflation, which excludes volatile items such as energy, will likely continue to moderate somewhat, added TD Bank’s Diana Petramala.

“All said, inflationary pressures are expected to remain rather tame in the coming year. The current rate of inflation is largely consistent with the amount of economic slack prevailing in the Canadian economy, as well as the current stage of recovery.”

Economists said the September numbers will do nothing to dissuade the Bank of Canada from staying put on interest rates at the next scheduled meeting in December. Earlier this week, the central bank applied the brakes on its tightening policy bias, freezing the policy interest rate at 1%.

The September increase in the overall rate was mostly attributed to energy, which jumped 5.6% over last year, partly on the back of a dramatic 7.7% hike in electricity prices.

Without energy, overall inflation rate would have been identical to the core rate — 1.5%.

As well, Statistics Canada said it noticed a big pick-up in the price of passenger vehicles during the month — to 5% from a 2.2 gain in August — as manufacturers shaved the level of incentives they were offering consumers.

Food rose 2.1%, more that the 1.6 pace seen in August.

On a month-to-month basis, overall prices rose 0.2 per cent — 0.3 per cent seasonally adjusted — from August.

Still, there was a general firming up of prices noticeable in September. The agency said prices rose in seven of the eight component groups it measures.

Aside from energy and automobiles, the main contributors to annual inflation were home replacement and renovation costs, which rose 5.6%; food, which advanced 2.1%; transportation, up 3.1%; and shelter, up 2.5%.

Prices also rose 2.4% on alcoholic beverages and tobacco, including a 4.6% hike on cigarettes, and tuition, up 3.8%.

The main contributors to lower inflation were clothing and footwear, which were 2.2% less in September than last year.

Regionally, prices were higher in every province in Canada compared with last year, with the Ontario rate of 2.9% the highest and Manitoba, at 0.5%, the lowest.