Canada’s “Rare” economic twist!

Inflation turns negative, falls below zero for first time in 15 years at -0.3 per cent Fri Jul 17, 8:28 AM Julian Beltrame, The Canadian Press Email Story IM Story Printable View By Julian Beltrame, The Canadian Press OTTAWA – Canada’s annual inflation rate dipped below zero for the first time in 15 years in June, as the low cost of filling up at the gas station compared to last year dropped the overall index to minus 0.3 per cent. The statistical oddity was widely expected and due solely to the rapid acceleration of gas prices across Canada at this time last year. comparison, consumers paid 24.3 per cent less to fill up at the pump this June than last year, when gas averaged 135.1 cents a litre. Filling up last month cost a relatively benign 101.6 cents a litre. Gasoline prices in June were higher than in May, however, producing an even rarer phenomenon of a negative inflation rate when prices in the real world are on the increase measured over the previous month. The month-to-month movement showed prices rising 0.3 per cent over May on the strength of the cost of gasoline, which was 8.6 per cent higher in June than it was in May. Economists have stressed that Canada does not have a deflation problem – a broad and prolonged period of falling prices – and that the dip into negative territory will be short-lived. Gasoline prices, which account for about five per cent of the Statistics Canada basket of goods that comprise the index, peaked at 136.6 cents last July and fell almost immediately afterwards, reaching a low of 76.5 cents a litre in December. Policy makers worry about deflation because it tends to influence consumers and businesses into postponing purchases in expectation of future lower prices, thereby further weakening an already struggling economy. But minus gasoline and the energy component, the cost of most things people purchase in Canada is rising, not falling. Overall, only three of the major components that go into calculation the consumer price index were in negative territory last month – shelter, clothing and footwear and transportation, which includes prices for gasoline. Statistics Canada said if the cost of energy were taken out of the calculation, the annual inflation rate would have been 2.1 per cent in June, with higher food prices the main contributor. As well, the Bank of Canada core inflation rate, which measures underlying pressure on prices and excludes volatile items such as energy and fresh fruit, stood at 1.9 per cent in June, near the central bank’s desired two-per-cent target. The last time Canada experienced a negative annual inflation reading was in November 1994, after the government slashed tobacco taxes in an effort to halt a burgeoning illegal cross-border traffic in cigarettes. Besides gas and energy, the cost of purchasing a passenger vehicle was also lower in June, falling 5.2 per cent from last year. That was up from 6.6 per cent decline registered in May and 8.3 per cent fall in April. The shelter component slid 0.8 per cent due to lower prices for natural gas and fuel oil, which were 23.7 per cent and 40.6 per cent lower than last year respectively, and savings from lower home prices and mortgage interest rates. Clothing and footwear fell 3.6 per cent with women’s clothing was down 6.1 per cent. Food was 5.5 per cent higher in June than a year ago, with health and personal care, recreation, education and reading, and alcohol and tobacco also rising. Regionally, annual inflation is in negative territory in four provinces, with Alberta the lowest rate at -1.6 per cent. – The annual inflation rate was negative 0.3 per cent in June, says Statistics Canada. Here’s what happened in the provinces and territories. (Previous month in brackets): -Newfoundland and Labrador 0.3 (0.6) -Prince Edward Island -1.1 (-0.3) -Nova Scotia -1.1 (-1.1) -New Brunswick -0.0 (0.2) -Quebec 0.2 (0.1) -Ontario 0.0 (0.4) -Manitoba 0.6 (0.8) -Saskatchewan 1.0 (0.7) -Alberta -1.6 (-0.7) -British Columbia -0.7 (0.1) -Whitehorse, Yukon 0.3 (0.4) -Yellowknife, N.W.T. 0.3 (0.3) -Iqaluit, Nunavut 3.0 (3.5) – The annual inflation rate was a negative 0.3 per cent in June, says Statistics Canada. The agency also released rates for major cities, but cautioned that figures may fluctuate widely because they are based on small statistical samples (Previous month in brackets): -St. John’s, N.L., 0.9 (1.1) -Charlottetown-Summerside, -0.5 (-0.8) -Halifax, -0.8 (-0.8) -Saint John, N.B., 0.1 (-0.1) -Quebec, 0.4 (0.4) -Montreal 0.4 (0.4) -Ottawa 0.2 (0.5) -Toronto 0.2 (0.5) -Thunder Bay, Ont., 0.0 (0.3) -Winnipeg, 0.6 (0.7) -Regina 1.8 (1.5) -Saskatoon 0.7 (0.4) -Edmonton -1.2 (-0.2) -Calgary -1.5 (-0.7) -Vancouver -0.5 (0.1) -Victoria -0.4 (0.4)

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