Consumer prices rose 0.4% in the 12 months to April 2009, down from the 1.2% increase in March, Statistics Canada said Wednesday.

Economists had forecast a 0.6% rise over the same month last year.

April’s inflation was the lowest since the 0.2% recorded in December 1994, when taxes on tobacco products were cut sharply.

The decline in the inflation rate is in line with the Bank of Canada’s April forecast, which calls for the rate to slip into negative territory mid-year, then rise to an average of 1% in the fourth quarter of the year.

While upward pressure on the consumer price index came primarily from food, the slowdown was due mainly to price declines for energy and reduced upward pressure from non-energy shelter components, the government agency said.

Excluding food, the CPI fell 1.1% in the 12 months to April. Excluding energy, the CPI rose 2.4% over the same period.

Food prices rose 7.1% during the 12-month period to April, slower than the 7.9% rise in March.

Shelter costs rose 0.2% during the 12-month period to April after increasing 2.1% in March. A sharp decline in natural gas prices mitigated growth in the shelter index in April. The 12-month change in the shelter price index has been slowing since July 2008.

Transportation costs fell 8% in the wake of year-over-year declines in prices for both gasoline and passenger vehicles.

Economists agree with the Bank of Canada’s expectation that the rate will fall below zero in the months to come.

“The downward trajectory for the headline inflation rate picked up speed in April and, with the big monthly increases in energy prices last summer unlikely to be replicated this year, we anticipate that the inflation rate will slip into negative territory in the months ahead,” said Dawn Desjardins, assistant chief economist at RBC Economics Research.

But the decline will be temporary, according to CIBC economist Krishen Rangasamy.

“All categories in the CPI, besides shelter, were either flat or saw monthly price increases,” Rangasamy pointed out. “An outbreak of broader or sustained deflation is very unlikely.”

Seasonally adjusted monthly CPI falls

On a seasonally adjusted monthly basis, the CPI fell 0.3% from March to April, after falling 0.2% from February to March. April’s decline was due primarily to a 1% drop in the shelter price index. Tempering the fall was a 0.2% increase in prices for food.

Excluding food and energy, the seasonally adjusted monthly CPI posted no change from March to April, after increasing 0.1% in the previous period.

Core inflation slows

The Bank of Canada’s core index advanced 1.8% over the 12 months to April, down from the 2% rise in March.

The seasonally adjusted monthly core index increased 0.2% from March to April, after posting no growth from February to March.

IE