• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Inflation Rate Drops to 2.2 Per Cent in February With Cheaper Gasoline

Posted on: Thursday, 16 March 2006, 12:00 CST

By SANDRA CORDON

OTTAWA (CP) - Cheaper fruit, vegetables, computer gear and clothes helped hold the annual inflation rate to just 2.2 per cent in February, Statistics Canada said Thursday.

That's down from the 2.8 per cent rate for price pressures reported in January.

But gasoline at the pump was more expensive than it was a year earlier and natural gas prices also jumped on an annualized basis. Still, the core inflation rate of 1.7 per cent held steady, compared with January.

That's the rate most closely tracked by the Bank of Canada because it excludes volatile food and energy items, which can fluctuate dramatically between months.

And with core inflation below the two per cent target set by the central bank, it won't feel any rush to much higher interest rates, analysts said.

After raising its key interest rate at five consecutive opportunities to its current level of 3.75 per cent, the central bank signalled earlier this month it may leave rates steady for some time.

Central bankers will likely nudge up borrowing costs once more by a quarter-point at their next opportunity April 25, but that should be the end of their tightening cycle, says Marc Levesque, chief Canadian strategist with TD Securities (TSX:TD).

"The odds are still tilted towards one last rate hike at (the Bank of Canada's) next fixed announcement date," he said.

"Obviously, it is going to depend on the (economic) data, but I think the data is pointing towards a final rate hike in April before they decide to lay down their arms."

Although core inflation remains muted, the trend suggests price pressures are edging higher at a bit quicker pace than the central bank expected, said Levesque.

Despite some forecasts of another inflation rate increase, the Canadian dollar still opened weaker after Thursday's inflation report.

The loonie opened at 86.32 cents US, down 0.3 of a cent from Wednesday's close.

Inflation was also running a bit slower in the United States last month, compared with January's consumer price index. Annual inflation averaged 3.6 per cent in February compared with a four per cent rate reported in January, the U.S. Labour Department said.

According to Statistic Canada, non-core energy items, such as prices at the gas pumps, generally continue to rise in Canada.

Although the price of gasoline dropped by 6.8 per cent last month, compared with January, year-over-year prices were higher. Filling up the gas tank cost 7.4 per cent more in February, compared with a year earlier.

Adding to inflation last month was more expensive natural gas. The price of natural gas shot up by 17.1 per cent last month, compared with February 2005.

The increase in natural gas prices ranged from a modest 4.6 per cent rise in Alberta to a whopping 22.7 per cent annualized jump in Ontario.

Besides higher energy prices in February, compared with one year earlier, higher homeowner replacement costs and the price to buy or lease autos also added to inflation.

Those factors were somewhat offset by cheaper insurance premiums for vehicles, less expensive women's clothing and cheaper computer gear.

The cost of women's clothing fell by 4.1 per cent last month, compared with one year earlier.

On a monthly basis, fresh vegetables were 6.8 per cent less expensive than in January while fresh fruit was 3.8 per cent cheaper.

The stronger loonie has helped reduce the cost of many imports, which in turn works to hold down inflation, said Levesque.

-

Here's what happened in the provinces and territories. (Previous month in brackets.) -Newfoundland 2.1 (2.6)

-Prince Edward Island 3.8 (3.6)

-Nova Scotia 2.4 (3.1) -New Brunswick 2.6 (3.1)

-Quebec 2.3 (2.7)

-Ontario 2.0 (3.0) -Manitoba 1.9 (2.2)

-Saskatchewan 1.9 (2.2)

-Alberta 3.3 (4.1)

-British Columbia 1.6 (1.6)

-Whitehorse, Yukon 2.6 (3.1)

-Yellowknife, N.W.T. 2.4 (2.6)

-Iqaluit, Nunavut 2.0 (1.5)

-

Statistics Canada also released rates for major cities but cautioned that figures may fluctuate widely because they are based on small statistical samples. (Previous month in brackets.)

-St. John's, N.L., 1.9 (2.4)

-Charlottetown-Summerside, 3.7 (3.4)

-Halifax, 2.3 (2.8)

-Saint John, N.B. 2.7 (3.1)

-Quebec, 2.4 (2.7)

-Montreal, 2.4 (2.7)

-Ottawa, 1.9 (3.0)

-Toronto, 2.0 (2.8)

-Thunder Bay, Ont., 1.7 (2.7)

-Winnipeg, 1.8 (2.2)

-Regina, 2.0 (2.1)

-Saskatoon, 2.0 (2.3)

-Edmonton, 3.2 (3.6)

-Calgary, 3.2 (4.4)

-Vancouver, 1.4 (1.4)

-Victoria, 1.7 (1.9)

Source: Canadian Press

More News in this Category