The annual rate of inflation slowed in December as the pace of rising food prices decreased and the cost of air travel compared with a year earlier fell, Statistics Canada said.
The agency said Wednesday the consumer price index was up 0.7% in December compared with a year earlier, after posting a year-over-year increase of 1% in November.
Prices rose in six of the eight major components on a year-over-year basis in December.
Food prices posted a year-over-year increase of 1.1% in December compared with 1.9% in November as the cost of fresh vegetables rose 1.1% compared with 4.6% in November. Prices for fresh fruit fell 6% year over year.
Transportation prices were down 0.6% as air transportation prices fell 14.5%.
“Inflation is muted in Canada and still very much bearing the scars of the health and economic crisis,” TD Bank senior economist James Marple wrote in a report.
“As the worst point in the crisis moves further into the rearview mirror, price growth will pick up. Driven by rising energy prices, the headline rate is likely to hit 2% by the second quarter of this year.”
Statistics Canada said gasoline prices in December were down 8.5% compared with a year earlier, but up 3.3% compared with November as oil prices rose.
Excluding gasoline, the annual pace of inflation in December was 1% compared 1.3% in November.
In a report, BMO chief economist Douglas Porter said that, overall, Canada’s monthly inflation rate was in line with the average pace for all of 2020 (0.7%) and was middle-of-the-road internationally.
“It’s now half the U.S. pace (1.4%), close to the latest U.K. reading (0.6%), but well above the negative prints still seen in the Euro Area and Japan,” Porter wrote.
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 1.57% for December, down from 1.67% in November.
With core inflation close to a three-year low, along with headline inflation of 0.7%, the central bank “will keep the policy taps wide open,” Porter wrote.