Canada’s inflation rate turned negative in April as the economy came to a standstill in the first full month of the pandemic.
Statistics Canada said Wednesday the consumer price index for April fell 0.2% compared with a year ago as gasoline prices plunged by 39.3%, the largest year-over-year decline on record.
The overall drop in the annual rate was the first year-over-year decline since September 2009.
The reading compared with a year-over-year increase of 0.9% in March, when the pandemic first started to affect the broader economy.
Economists on average expected a reading of -0.1% for April, according to financial markets data firm Refinitiv.
The price changes helped paint a portrait of what shifted last month as the pandemic drove demand for some goods and services over others.
When prices drop, consumers may start to put off buying things now in hopes of paying less in the future. When that happens, businesses can be hurt, making the economy even worse.
Excluding energy, Statistics Canada said CPI rose 1.6%.
“The biggest item bringing down the index — the price at the pumps — has moved higher in recent weeks,” TD Bank senior economist James Marple wrote in a report.
“With activity slowly normalizing through May, the biggest of the price declines are likely in the rear-view mirror.”
Household cleaning products increased on a monthly basis by 4.6%, while toilet paper fuelled an increase in the “paper supplies” category by 6%, the largest monthly increase for that index on record.
Travel and accommodation prices fell 9.8% on a yearly basis in April, the largest decline since 2011 as public health restrictions limited travel to and within Canada, the agency said.
Statistics Canada said there were notable declines in locations near major tourist attractions, including Niagara Falls and the Rocky Mountains.
Food prices for rice, eggs and margarine posted “significant increases,” the agency said, coinciding with higher demand for non-perishable products as consumers were encouraged to limit shopping trips.
Prices for pork and beef increased by nine and 8.5%, respectively, compared with April 2019. The change was due to a boost in sales and supply issues, including a slowdown in cross-border shipping and production cuts or temporary closures of Canadian meat processing plants, Statistics Canada said.
CIBC senior economist Royce Mendes wrote in a note that the Bank of Canada will “look through the deflationary print” because the it didn’t reflect of the pricing environment for consumers.
Mendes said the average of the three core measures of inflation tracked by the Bank of Canada was 1.8%.
“Nevertheless, with the economy likely still underperforming if and when further restrictions are lifted, there will be an underlying drag on inflation that central bankers will need to offset with additional monetary easing,” Mendes writes.
In a separate report, Statistics Canada said wholesale sales fell 2.2% to $63.9 billion in March.
The overall drop came as the motor vehicle and motor vehicle parts and accessories subsector plunged 21.2%, the largest monthly percentage drop since January 2009. Excluding the subsector, wholesale sales rose 2.1%.
In volume terms, wholesale sales dropped 2.8%.