Canada’s consumer price index (CPI) rose 4.3% year-on-year in March, down nine-tenths from February, and remained at its lowest level since September 2021, Statistics Canada, the national statistics agency, said on Tuesday.
This slower progress is explained by the bias from the base year effect, according to the agency, as monthly inflation stood at 1.4% in March 2022. This puts the consumer price index at a low not seen since the summer of 2021.
March’s surge is being helped by food prices, which are up 9.7% in 12 months, down nine-tenths on fresh fruit and vegetable containment. That number is dropping from the full double digits after seven months. The main products that have increased the most include fresh vegetables (10.8%) and fresh fruit (7.1%).
The organization later explained that fuel price developments were “pulling down” inflation, as gasoline was 13.8% yoy cheaper in March, marking the largest yoy decline since March 2022.
On the other hand, mortgage interest costs rose 26.4% in March compared to the same month in 2022, up 2.5% since February.
Core inflation, which excludes food and energy due to their greater volatility, was 4.5%, down three-tenths from February and the lowest since March 2022.
The Bank of Canada decided last Wednesday to leave interest rates unchanged for the second straight day at 4.50%, set in January, which at the time was already the highest price of money recorded in the country since the 2008 crisis.
“The consumer price index (CPI) is expected to decline rapidly to around 3% by mid-2023 and then decline more gradually to the 2% target by the end of 2024,” it said.
The agency said demand still exceeds supply and the labor market remains “adjusted”. However, economic growth in the first quarter of 2023 seems to be “stronger than forecast in January” thanks to good export development and “solid” consumption.
The “strong” population growth also contributed to strengthening the labor market and overall demand. In this way, vacancies were reduced even though wages continued to rise above productivity gains.
On the contrary, the housing market remained weak,” and external demand is expected to slow, which will affect exports and business confidence. In general, GDP growth will be “lukewarm” for the rest of this year, only to gradually gain momentum over the following year. Thus, GDP will grow by 1.4% in 2023 and by 1.3% in 2024, before increasing again to 2.5% in 2025.
“As more families renew their mortgages at higher interest rates and the impact of tightening monetary policy spills over into the economy, we expect consumption to slow down this year,” the company added.