The country’s annual inflation rate once again rang in at 1.6% last month as higher energy costs offset a seventh consecutive decline in grocery store prices, Statistics Canada said Friday.
The agency’s consumer price index for April identified higher prices for gasoline and natural gas as the biggest upward drivers in year-over-year inflation.
On the other hand, fresh produce and clothing applied the most downward pressure on the inflation rate.
Heading into next week’s interest rate announcement, experts like BMO chief economist Doug Porter expect the Bank of Canada to emphasize the softening underlying inflation indicators, which strip out some of the more volatile components.
“The modest core inflation we’re seeing is probably the single, strongest argument the Bank of Canada has to do nothing,” Porter said, adding that ongoing uncertainty over U.S. policy, particularly on trade, would be up there as well.
“There’s just no rush, no urgency at all for the Bank of Canada to move on rates.”
Porter said on the one side, there are all kinds of indicators — like hot housing markets, robust consumer spending, the low unemployment rate and strong growth to start the year — telling the central bank to hike its very low, interest rate policy.
But at the same time, he noted Friday’s numbers revealed that the average of the three core inflation measures has slid to about 1.4% from 1.6% since the beginning of 2017. It’s slipping further away from the bank’s ideal target of 2%, he added.
“While the economy is showing a strong momentum, the inflation remains particularly disappointing,” National Bank senior economist Matthieu Arseneau wrote in a research note to clients, which also pointed out that there’s usually a three-to-five-quarter lag for underlying inflation to respond to economic conditions.
“For this reason, we continue to expect core (inflation) to speed up in 2017 in line with the recent economic momentum.”
Two of the agency’s three measures of core or underlying inflation slowed last month, while the third was unchanged. The indicators are closely scrutinized by the Bank of Canada. CPI-common stayed at 1.3% last month, CPI-median decelerated to 1.6% from 1.7% and CPI-trim slowed to 1.3% from 1.4%.
The annual headline inflation rate matched Statistics Canada’s 1.6% reading for March, but was slightly below a consensus estimate of 1.7%, according to Thomson Reuters data.
Prices at the pump were 15.9% higher last month and the cost of natural gas rose 15.2% more, Statistics Canada said.
Overall food prices were down 1.1% as prices for fresh fruit fell 6.2%, fresh vegetables slipped 5.9% and meat dropped 2.1%.
The cost of kids’ clothing was 6.2% lower and women’s clothes cost 2.8% less in April compared with a year earlier.
Statistics Canada said the inflation rate was higher in three provinces, including Saskatchewan, which easily saw the biggest acceleration after it raised its provincial sales tax in late March. Saskatchewan’s annual inflation rate sped up to 1.4% last month after rising just 0.6% in March.
Prices rose at a slower pace year-over-year in five provinces, while they were unchanged in two provinces.
The agency also released its latest retail trade numbers, which showed total sales in March delivered a larger than expected rebound, rising 0.7%. The data followed a month-over-month February contraction of 0.4%.
Total retail trade in March was nearly $48.3 billion thanks to stronger sales at motor vehicle and parts dealers, which was mostly due to an increase in new car purchases.
Economists had predicted a 0.4% increase in retail trade for March, according to Thomson Reuters.