Canada’s annual inflation was up last month as price pressures strengthened for fresh vegetables, mortgage interest costs and auto insurance.
Statistics Canada said Wednesday that the country’s consumer price index increased 1.9% in March, in line with economists’ expectations. It was higher than its readings of 1.5% for February and 1.4% in January, when the inflation number was at a 15-month low point.
The agency’s core inflation readings, which are considered better measures of price pressures, rose 2% in March—up from 1.9% in February. The core readings omit more volatile items like gasoline and are closely watched by the Bank of Canada.
The firmer inflation picture brings both gauges closer to the central bank’s ideal 2% target, and comes as the economy works through a soft patch brought on by the drop in crude oil prices at the end of last year.
Compared with a year earlier, Statistics Canada said consumers paid 15.7% more in March for fresh vegetables, 8.1% more on mortgage borrowing costs and 5.6% more for car insurance.
Year-over-year gas prices dropped 4.4% last month, internet costs dropped 9.2% and travel tours moved down 6.4%.
Higher pump prices were a major driver of inflation last year before lower gas prices weighed on the measure in recent months.
In March, however, the downward pressure from cheaper gas eased off as global oil prices climbed, Statistics Canada said. In a report, Matthieu Arseneau, deputy chief economist at National Bank, said gas prices “surged” 11.6% in the month, “a pace above the historical norm for March.”
In a research note, RBC senior economist Josh Nye said the strengthening in headline inflation was largely an energy story, “as the decline in gasoline prices late last year (driven by lower global oil prices) continues to be reversed.”
Inflation accelerated in every province last month, with Alberta, New Brunswick and Prince Edward Island registering the strongest price growth.
The economy abruptly decelerated in the final three months of 2018. Bank of Canada governor Stephen Poloz has predicted the weakness to be temporary and for the economy to strengthen in the second half of 2019.
The central bank, which has hiked its key interest rate five times since mid-2017, will make a policy announcement next Wednesday. It’s widely expected to leave the benchmark unchanged.
Today’s data indicate “limited slack in the Canadian economy and no need for rate cuts by the Bank of Canada,” Arseneau said.
In a separate report Wednesday, StatsCan said Canada’s February trade deficit was $2.9 billion, narrowing the gap from a revised shortfall of $3.1 billion in January.
Exports were down 1.3% in February, while imports declined 1.6%.
Statistics Canada’s revision for January showed a smaller deficit—by more than $1 billion—compared to its initial estimate of $4.2 billion.
The combined trade deficit for February, January and December, which reported a shortfall of $4.8 billion, was $10.8 billion—the country’s biggest three-month deficit on record.