TORONTO – Statistics Canada almost entirely confirms the experts’ forecasts: the end of the consumer carbon price has significantly reduced the inflation in April, bringing the annual rate to 1.7% from 2.3% in March: this is slightly higher than the 1.6% forecast by economists in recent days.
According to StatCan’s report, published today, the cancellation of the consumer carbon price by the government led by Mark Carney has caused, in April, a drop in gasoline prices of 18.1% on an annual basis, also because global oil prices have fallen due to the drop in demand and increased production by OPEC countries. Natural gas prices also fell by 14.1% on an annual basis in the same month of April.
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Excluding energy from the consumer price index, StatCan notes that the increase would have stood at 2.9% in April, up from 2.5% in March calculated also excluding energy. Further evidence that the decline in refunds is largely due to the consumer carbon price is that the only Canadian province that did not see a slowdown in inflation last month was Quebec, which has its own “carbon tax” system.
However, the elimination of the consumer carbon price could not be the only cause of the decline in inflation in Canada. According to RSM economist Tu Nguyen, another equally influential factor must be added to that factor: shelter. “The other major factor that applied downward momentum to inflation is shelter. Slowing demand due to stricter immigration policies have led shelter inflation to slide to 3.4%, the lowest since 2021. Shelter prices are expected to remain cool in the next few months as interest rates stay low and the housing market becomes more balanced…” wrote Nguyen in a post on Linkedin.
Inflation down, prices up
Falling inflation in the rest of the country was offset by rising prices: with the exception of gasoline, consumers had to deal with increases across the board: supermarket food prices rose 3.8% in April, StatCan reports, up from 3.2% in March. On an annual basis, fresh vegetable prices rose 3.7%, fresh and frozen beef prices rose 16.2%, and coffee and tea prices rose 13.4%. Supermarket inflation thus outpaced the general consumer price index for the third consecutive month. Canadian travelers were also affected by the crisis, with travel prices rising 3.7% per month in April, reversing an 8% decline in March.
The April inflation data comes just over two weeks before the Bank of Canada’s next interest rate decision, scheduled for June 4. Canada’s central bank kept its benchmark rate at 2.75% last month, saying it needed more time to assess the impact of the trade war between Canada and the United States on the economy.
There’s also another piece of data fueling uncertainty: the national unemployment rate rose to 6.9% in April, as the trade-sensitive manufacturing sector took a hit.
So many complicating factors make the central bank’s decision much less easy than expected.
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