June inflation rate turns positive amid early stages of economic reopening

June inflation rate turns positive amid early stages of economic reopening

June inflation rate turns positive amid early stages of economic reopening

OTTAWA — The country’s inflation barometer turned positive last month after two months of deflation as the consumer price index increased by 0.7 per cent in June compared to a year earlier, Statistics Canada reported Wednesday.

The consumer price index had registered two months of negative readings leading up to June, first with 0.2 per cent annualized decline in April, then a further 0.4 per cent drop in May.

The turnaround from May to June matched the fastest acceleration in the so-called headline inflation reading since March 2011, but still left the measure well below the Bank of Canada’s two-per-cent comfort zone.

BMO Financial Group chief economist Douglas Porter said there is modest room for optimism when the inflation result is paired with some of the other economic readings for June, such as an increase in retail and manufacturing sales.

Even so, things are still a long way from normal, he said.

“We have to treat all of these figures with a bit of caution just because it is such an exceptional circumstance,” Porter said in an interview.

Clothing and footwear prices were up after two months of steep declines while brick-and-mortar stores were closed due to COVID-19, but they were still down on a year-over-year basis.

Electricity prices increased, largely a result of Ontario rolling back a price reduction from March the provincial government kicked in as people were ordered to stay home to slow the spread of COVID-19.

Gasoline prices recouped some steep declines as businesses and public services gradually reopened, and what the statistics agency called a general increase in local travel during June.

Statistics Canada says that excluding gasoline, the consumer price index rose 1.2 per cent in June.

“As the economy continues to reopen, inflation should remain in positive territory,” CIBC senior economist Royce Mendes wrote in a note. “That said, the significant slack that is expected to persist will create an underlying drag on the pricing environment for businesses.”

Prices rose the most in Alberta compared to June 2019, when commodity prices fell and the provincial government eliminated a carbon tax. Low prices for furnace fuel oil made price growth weakest in the Atlantic provinces.

The average of Canada’s three measures for core inflation, which are considered better gauges of underlying price pressures and closely tracked by the Bank of Canada, was about 1.8 per cent compared with around 1.6 per cent for May.

The Bank of Canada forecast last week that annual inflation will be 0.6 per cent this year and vowed to maintain its key interest rate at the lower limit of 0.25 per cent until inflation hits the central bank’s two-per-cent target.

The result of the drop from March continued to be felt in June as Statistics Canada reported mortgage interest costs fell for the second consecutive month, this time by 0.3 per cent.

Shifts in consumer behaviour have thrown off the headline consumer price index, which Statistics Canada said would have shown annualized readings of 0.0 per cent in April and -0.1 per cent if it better reflected pandemic spending.

The agency did not include an inflation reading under the experimental price index created with help from the central bank.

The Bank of Canada has raised deflation as a key concern, but that doesn’t seem to be an immediate risk to the Canadian economy, said TD senior economist James Marple.

Porter said whether the country is left with deflation, low or high inflation depends on the course of the pandemic, and the effects on the aggressive fiscal and monetary policies in Ottawa.

“It’s still an active debate,” he said.

“Because of this very dramatic economic episode, we’ve got bigger risks to the outlook — both on the high-end and low-side — for inflation for the next few years.”

This report by The Canadian Press was first published July 22, 2020.

Jordan Press, The Canadian Press

inflation

Just Posted

The Government of Alberta identified 115 new COVID-19 cases Sunday, bringing the provincial total to 3,089.
(Black Press file photo)
Alberta reports 100 new cases of COVID-19

The Central zone sits at 218 active cases

The Government of Alberta identified 115 new COVID-19 cases Sunday, bringing the provincial total to 3,089.
(Black Press file photo)
Red Deer drops to 71 active cases of COVID-19

Province adds 127 new cases of the virus

Police officers and their dogs undergo training at the RCMP Police Dog Services training centre in Innisfail, Alta., on Wednesday, July 15, 2015. Mounties say they are searching for an armed and dangerous man near a provincial park in northern Alberta who is believed to have shot and killed a service dog during a police chase. THE CANADIAN PRESS/Jeff McIntosh
RCMP search for armed man in northern Alberta after police dog shot and killed

Cpl. Deanna Fontaine says a police service dog named Jago was shot during the pursuit

Alberta now has 2,336 active cases of COVID-19, with 237 people in hospital, including 58 in intensive care. (Black Press file photo)
Red Deer down to 73 active cases of COVID-19, lowest since early November

The Central zone has 253 active cases of the virus

Marco Mendicino, Minister of Immigration, Refugees and Citizenship during a press conference in Ottawa on Thursday, May 13, 2021. THE CANADIAN PRESS/Sean Kilpatrick
Canada to welcome 45,000 refugees this year, says immigration minister

Canada plans to increase persons admitted from 23,500 to 45,000 and expedite permanent residency applications

FILE – Most lanes remain closed at the Peace Arch border crossing into the U.S. from Canada, where the shared border has been closed for nonessential travel in an effort to prevent the spread of the coronavirus, Thursday, May 7, 2020, in Blaine, Wash. The restrictions at the border took effect March 21, while allowing trade and other travel deemed essential to continue. (AP Photo/Elaine Thompson)
Feds to issue update on border measures for fully vaccinated Canadians, permanent residents

Border with U.S. to remain closed to most until at least July 21

Blair Lebsack, owner of RGE RD restaurant, poses for a portrait in the dining room, in Edmonton, Friday, June 18, 2021. Canadian restaurants are having to find ways to deal with the rising cost of food. THE CANADIAN PRESS/Jason Franson
Canadian restaurateurs grapple with rising food costs, menu prices expected to rise

Restaurants are a low margin industry, so there’s not a lot of room to work in additional costs

Orange shirts, shoes, flowers and messages are displayed on the steps outside the legislature in Victoria, B.C., on Tuesday, June 8, 2021 following a ceremony hosted by the Songhees and Esquimalt First Nations in honour of the 215 residential school children whose remains have been discovered buried near the facility in Kamloops, B.C. THE CANADIAN PRESS/Chad Hipolito
Alberta city cancels Canada Day fireworks at site of former residential school

City of St. Albert says that the are where the display was planned, is the site of the former Youville Residential School

Barbara Violo, pharmacist and owner of The Junction Chemist Pharmacy, draws up a dose behind vials of both Pfizer-BioNTech and Oxford-AstraZeneca COVID-19 vaccines on the counter, in Toronto, Friday, June 18, 2021. An independent vaccine tracker website founded by a University of Saskatchewan student says just over 20 per cent of eligible Canadians — those 12 years old and above — are now fully vaccinated. THE CANADIAN PRESS/Nathan Denette
At least 20% of eligible Canadians fully vaccinated, 75% with one dose: data

Earlier projections for reopening at this milestone didn’t include Delta variant

This undated file photo provided by Ernie Carswell & Partners shows the home featured in the opening and closing scenes of The Brady Bunch in Los Angeles. Do you know the occupation of Mike Brady, the father in this show about a blended family? (Anthony Barcelo/Ernie Carswell & Partners via AP, File)
QUIZ: A celebration of dad on Father’s Day

How much do you know about famous fathers?

A dose of the Pfizer-BioNTech COVID-19 vaccine is pictured at a vaccination site in Vancouver Thursday, March 11, 2021. THE CANADIAN PRESS/Jonathan Hayward
NACI advice to mix vaccines gets varied reaction from AstraZeneca double-dosers

NACI recommends an mRNA vaccine for all Canadians receiving a second dose of a COVID-19 vaccine

Bruce Springsteen performs at the 13th annual Stand Up For Heroes benefit concert in support of the Bob Woodruff Foundation in New York on Nov. 4, 2019. (Greg Allen/Invision/AP)
Canadians who got AstraZeneca shot can now see ‘Springsteen on Broadway’

B.C. mayor David Screech who received his second AstraZeneca dose last week can now attend the show

Most Read