Canada: Inflation remains above the Bank’s target for the fourth straight month in February
Consumer prices increased 0.1% from a month earlier on a seasonally-adjusted basis in February, virtually the same as January’s uptick. According to Statistics Canada, higher prices for transportation, housing and utilities, and recreation drove the increase in February.
Inflation eased to 2.2% in February (January: 2.4%), the reading beat market analysts’ expectations of 2.1% and remained above the 2.0% midpoint of the Central Bank’s 1.0%–3.0% target range for the fourth consecutive month. Meanwhile, annual average inflation increased to 2.1% in February from 2.0% the month prior.
Commenting on January’s print, James Marple, a senior economist at TD Economics, noted:
“The COVID-19 outbreak is likely to show up dramatically in inflation data in the months ahead, most obviously in the sharp drop in energy prices. Airlines, which have been effectively shut down due to the pandemic will be another area to monitor..”
This year, inflation is expected to trend below target as Covid-19 weighs on economic activity and as energy prices remain depressed. Prices for essentials such as food, and health and personal care could jump in the short-term due to front-loaded purchasing by consumers, but slack in the economy should more than offset temporary shortages.