Statistics Canada said consumer prices rose 3.3% in the 12 months to March. This advance follows a 2.2% increase in the 12 months to February.
The core rate of inflation, which excludes volatile items such as fruit and gasoline advanced 1.7% in the 12 months to March, following a 0.9% rise in February. The higher increase in March was mainly a result of larger price increases for travel services, clothing, and the purchase of passenger vehicles.
The seasonally adjusted monthly core index increased 0.5% in March, the largest increase since November 2008. The March increase follows a 0.1% decline in February.
Energy prices increased 12.8% during the 12 months to March, following a 10.6% advance in February. Gasoline prices increased 18.9% in March, following a 15.7% gain in the 12 months to February. Prices for fuel oil and other fuels increased 31.3%, while electricity prices rose 4.3%.
Excluding energy, the Consumer Price Index (CPI) rose 2.4% in the 12 months to March, following a 1.4% increase in February.
Prices for food purchased from stores rose 3.7% in March, the largest year-over-year advance since August 2009. This increase follows a 2.0% gain in February.
Other items that contributed significantly to the pickup in prices were travel services, clothing, and the purchase of passenger vehicles.
Despite the high flying Canadian dollar, Yanick Desnoyers, assistant chief economist with National Bank Financial Group, feels the CPI is now back in positive territory that, “in light of this morning’s inflation data this wording appears to be too strong. The process of normalizing interest rates must resume in Canada. We think that a July rate hike is the most likely scenario.”
Derek Burleton, VP and deputy chief economist at TD Economics doesn’t think the price jump is the start of a trend in relation to the core inflation, but said “A combination of a high Canadian dollar, well-anchored inflation expectations and the pass-through of business cost savings from sales tax harmonization in Ontario and British Columbia are likely to keep core inflation on the low side. On the flip side, a continued above-trend economic growth performance over the next few quarters is likely to be the main catalyst pulling core inflation gradually higher.
“Still, this morning’s surprisingly strong CPI report puts one more tick in the rate hike column. Barring another blockbuster inflation report next month, we maintain the view that the Bank of Canada will wait until the July fixed announcement to resume rate increases.”
Consumer prices rose at a faster rate in every province in March compared with February, year over year. Gasoline continued to be a major factor contributing to the increase in consumer prices in all provinces.
In the 12 months to March, Nova Scotia (+3.9%) posted the largest increase in consumer prices.
In Ontario, consumer prices rose 3.6% in the 12 months to March, after advancing 2.5% in February. Gasoline prices in Ontario rose 20.4% in March, following an 18.3% increase in February. Prices for food purchased from stores increased 3.6% in March, after advancing 1.8% in February. Higher prices were observed for fresh vegetables as well as for bakery products.
Consumer prices in Quebec increased 3.3% in the 12 months to March, following a 2.2% advance in February. Prices for gasoline rose 18.5% in March. Consumers paid 4.6% more for food purchased from stores in March, after paying 1.7% more in February. Prices rose for fresh vegetables, meat and dairy products.
Prices in British Columbia went up 3.1% in the 12 months to March, following a 1.8% increase in February. Much of the difference can be attributed to traveller accommodation, where prices decreased at a much slower rate in March (-3.1%) than they did in February (-38.1%), from a year earlier.
Drivers in British Columbia paid 16.3% more for gasoline in March compared with the same month in 2010. This rise follows a 12.6% increase in February. Consumers also paid more for food purchased from restaurants and electricity.
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