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Lower Gasoline Prices Hold Back Inflation For March As CPI Rises 1.2 Per Cent

Darpan News Desk IANS, 17 Apr, 2015 12:16 PM
    OTTAWA — Higher prices for everything from food to electricity last month were offset in part by cheaper gasoline as the inflation rate ticked higher in March.
     
    Nonetheless, TD Bank economist Leslie Preston said the increase in inflation was unlikely to spur a change in course by Bank of Canada governor Stephen Poloz amid concerns about the strength of the economy.
     
    "We have this heating up that we've seen over the past year in a lot of core inflation categories, but it is not expected to continue going forward," said Preston, who added that TD expects the Bank of Canada to keep its key rate on hold this year.
     
    Statistics Canada said Friday the consumer price index for March was up 1.2 per cent from a year ago. That compared with a year-over-year gain of 1.0 per cent in February.
     
    Economists had estimated the inflation rate would remain at 1.0 per cent, according to Thomson Reuters.
     
    Excluding gasoline, the consumer price index was up 2.2 per cent compared with a year ago, matching the increase in February, while the Bank of Canada's core index, which excludes the most volatile components, was up 2.4 per cent. Economists had expected an increase of 2.1 per cent in the core rate.
     
    The central bank aims to keep the core rate close to 2.0 per cent.
     
    Preston pointed out that the inflation report looks at what prices have done over the past 12 months, while Poloz needs to be looking ahead.
     
    "We may have seen a pickup in core (inflation), but the economic reality that the Bank of Canada's dealing with is that Canada's economy likely slowed to around one per cent growth in the first half of this year" she said.
     
    "That's quite slow growth, so we're likely to see a lot of price pressures in the Canadian economy cool over the coming months."
     
    The Bank of Canada maintained its key interest rate at 0.75 per cent this week as it lowered its growth economic forecast in its latest monetary policy report. 
     
    The central bank now expects real GDP to grow by 1.9 per cent this year, a downgrade from its 2.1 per cent projection in January. The report also called for core inflation for the first quarter to come in at 2.1 per cent.
     
    "Core inflation could ease slightly as slack opens up in the economy this year, but not enough to give a clarion call for another rate cut," CIBC chief economist Avery Shenfeld wrote in a report.
     
    "Today's data reinforce our forecast that the Bank of Canada will be on hold in 2015."
     
    On a seasonally adjusted monthly basis, the Canadian consumer price index was up 0.4 per cent in March, following a 0.2 per cent increase in February. The seasonally adjusted core index was up 0.4 per cent on a monthly basis for March, following a gain of 0.1 per cent in February.
     
    Prices were up in seven of the eight components tracked, led by higher prices for food.
     
    Shoppers paid 3.8 per cent more for food in March compared with a year ago, boosted by a 4.2 per cent price increase in food sold in stores and a 2.8 per cent increase in restaurant meals.
     
    Shelter costs rose 1.4 per cent, boosted by homeowner's home and mortgage index, which was up 9.1 per cent. Rent, property taxes and electricity costs were all also higher.
     
    The transportation group, however, which includes gasoline, dropped 3.9 per cent.
     
    Gasoline prices for March were down 19.2 per cent compared with a year ago, however the drop was smaller than the 21.8 per cent year-over-year drop in February.
     
    Prices were higher in eight provinces, as Ontario posted the biggest increase of 1.6 per cent. Prices were lower in Prince Edward Island and Alberta as they slid back 0.8 per cent and 0.1 per cent respectively.
     
    Meanwhile, Statistics Canada also reported Friday that retail sales posted a gain of 1.7 per cent in February to total $42.2 billion following two consecutive monthly declines.
     
    Economists had expected a gain of 0.5 per cent for the month, according to Thomson Reuters.
     
    Retail sales posted gains in all 11 subsectors, led by general merchandise stores which climbed 5.6 per cent for the month.
     
    Retail sales were up in seven provinces, led by British Columbia, Ontario and Quebec. Newfoundland and Labrador, Prince Edward Island and Nova Scotia slipped lower.

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