Lower gasoline prices helped Canada’s annual rate of inflation turn negative in June for the first time since 1994.

Statistics Canada reported Friday that the 12-month Consumer Price Index fell to minus 0.3% last month. The June decrease matched the expectations of economists.

“The decrease was due primarily to a 12-month decline of 19% in prices for energy products, particularly gasoline,” Statistics Canada said in a release.

When energy costs are factored out, the CPI actually rose 2.1% in June.

Gasoline prices dropped 24.3% between June 2008 and June 2009, following a 12-month decline of 25.1% in May.

While gasoline was down, the major contributor putting upward pressure on CPI in June continued to be higher food prices.

StatsCan said food price increases have been slowing since March 2009. In the 12 months to June, food prices rose 5.5%, compared with one-year increases of 6.4% in May and 7.1% in April

On a seasonally adjusted one-month basis, the CPI rose 0.3% from May to June, after increasing 0.2 percent from April to May. The June increase was mainly due to a rise in gasoline prices between May and June.

Core inflation rate slows

The Bank of Canada’s core index advanced 1.9% over the 12 months to June, following a 2.0% rise in May.

The seasonally adjusted monthly core index increased 0.2% from May to June, after a 0.3% rise from April to May.

The Bank of Canada is scheduled to make its next interest rate announcement on Tuesday, July 21. Most analysts expect the key overnight rate target to remain at 0.25%.


Leading indicators down in June

Separately, StatsCan its broad measure of economic activity fell by 0.1% in June, as housing and the stock market posted gains but all manufacturing sectors were down.

The leading indicators track 10 components of the economy that lead cyclical activity in the economy.

StatsCan said its housing index jumped 4.9% thanks to a recovery in existing home sales, while other components of household demand declined, but at a much slower rate than at the start of the year.

New motor vehicle sales are up 8% since December, led by higher demand for trucks.

All three manufacturing components were down in June, with shipments falling faster than inventories, even before cuts in the auto industry in May.

StatsCan said there was one positive sign for exports, an increase in the leading indicator for the United States, its first advance since the credit crisis began in August 2007.

IE