Inflation Falls Below Zero in Canada for First Time Since 2009
Canadian inflation went negative for the first time since the 2009 recession after Covid-19 put the brakes on the world economy.
(Bloomberg) -- Canadian inflation went negative for the first time since the 2009 recession after the coronavirus lockdown put the brakes on the world economy.
Consumer prices dropped 0.2% in April from the same month a year earlier, Statistics Canada reported Wednesday from Ottawa. That’s down from a 0.9% annual rate in March and 2.2% in February.
The report adds inflation to the list of economic indicators showing an historic impact from the coronavirus pandemic. Collapsing gasoline prices have pulled inflation lower over the past two months, but weak demand should keep it at extremely low levels for an extended period. That could even spur worries about deflation and keep pressure off the Bank of Canada to ease up on accommodation efforts any time soon.
“With the economy likely still underperforming if and when further restrictions are lifted, there will be an underlying drag on inflation that central bankers will need to offset with additional monetary easing,” Royce Mendes, an economist at Canadian Imperial Bank of Commerce, said in a note to investors.
Gasoline prices continued to fall as demand remained low because of limited travel, business closures and a supply glut. In April, gasoline posted a 39.3% drop, marking the biggest year over year decline on record. Excluding gasoline, inflation rose 1.6% from the same period last year.
Core inflation readings, which factor out volatile items like energy prices and are often seen as a better measure of underlying price pressure, declined to 1.8%, from 1.83% in the prior month, the lowest since January 2019.
Consumers paid less for transportation, traveler accommodation, clothing and education but paid more for food and household cleaning products. Supply chain issues resulted in higher prices for beef and pork. The uptick in prices for household cleaning products and toilet paper is a result of increased demand.
From March, prices fell 0.7%, matching the largest one-month drop since 2008. Excluding gasoline, inflation dipped 0.1% on the month.
Statistics Canada also said it was unable to gather as much data as usual because in-person collection was suspended and some establishments were temporarily closed.
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