Consumer prices rose 1.2% in the 12 months to March 2009, down from the 1.4% increase in February, Statistics Canada said Friday.

The March rate was slightly lower than the 1.4% annualized inflation rate that economists had been projecting.

On a seasonally adjusted monthly basis, consumer prices fell 0.3% from February to March.

A 6.2% decline in transportation costs was the key factor in the drop in annual inflation last month, as year-over-year price drops were seen for gasoline, and the purchase and leasing of passenger vehicles.

Excluding gasoline, the annual rate of inflation came in at 2.4%.

Canadians paid more for food and shelter last month.

Food costs rose 7.9% from March 2008 to March this year — the largest increase since November 1986.

StatsCan said large price increases were seen for fresh vegetables, which were up more than 26%. The cost of fresh fruit was up 19.3%, while costs for non-alcoholic beverages shot up more than 10%, and cereal products were up 11%.

Shelter costs, the second largest factor behind food costs, had a 12-month rate of growth of 2.1% in March, after increasing 3% in February. The annual change in the shelter costs has slowed since reaching a peak of 5.4% in July 2008.

The Bank of Canada’s core index advanced 2% over the 12 months to March, up slightly from the 1.9% rise posted in February.

The seasonally adjusted monthly core index posted no growth from February to March, after increasing 0.4% from January to February.

IE