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)
Red Deer COVID cases continue to fall

114 cases in Red Deer, down one from Saturday

File Photo
Blackfalds RCMP seeking suspects in traffic collision

RCMP are asking the public for help identifing two suspects wanted for multiple offences

Maskwacis Pride crosswalk (Left to right): Montana First Nation Councillor Reggie Rabbit, Samson Cree Nation Councillor Louise Omeasoo, Samson Cree Nation Councillor Katherine Swampy, Samson Cree Nation Councillor Shannon Buffalo, Samson Cree Nation Chief Vern Saddleback.
Pride in Maskwacis

The 4th inaugural Maskwacis Pride crosswalk painting took place on Saturday 12, 2020.

Alberta Premier Jason Kenney arrives at the 2021 budget in Edmonton on Thursday, Feb. 25, 2021.THE CANADIAN PRESS/Jason Franson
Alberta launches COVID vaccine lottery with million-dollar prizes to encourage uptake

The premier says the lottery will offer three prizes worth $1 million a piece, as well as other prizes

The City of Red Deer sits at 249 active cases of the virus, after hitting a peak of 565 active cases on Feb. 22. (Black Press file image)
Red Deer down to 119 active COVID-19 cases

Province identifies 179 new cases Saturday

Canadian Prime Minister Justin Trudeau participates in a plenary session at the G7 Summit in Carbis Bay, England on Friday June 11, 2021. THE CANADIAN PRESS/Adrian Wyld
Canada donating 13M surplus COVID-19 vaccine doses to poor countries

Trudeau says the government will pay for 87 million shots to be distributed to poor countries

The Kamloops Indian Residential School is photographed using a drone in Kamloops, B.C., Monday, June, 14, 2021. The remains of 215 children were discovered buried near the former school earlier this month. THE CANADIAN PRESS/Jonathan Hayward
Communities grapple with what to do with former residential and day schools

Some tear them down as a tool to help healing, others repurpose them as tools for moving forward

RCMP Const. Shelby Patton is shown in this undated handout photo. RCMP say that Patton was hit by an allegedly stolen truck that he had pulled over on Saturday morning in Wolseley, east of Regina. THE CANADIAN PRESS/HO, RCMP
Pair charged in Saskatchewan Mountie’s death make first court appearance

Const. Shelby Patton was hit by an allegedly stolen truck that he had pulled over Saturday morning

David and Collet Stephan leave for a break during an appeal hearing in Calgary on Thursday, March 9, 2017. THE CANADIAN PRESS/Todd Korol
Appeal Court rejects stay for Alberta couple facing third trial in son’s death

Pair accused in their earlier trials of not seeking medical attention for their son sooner

Calgary Stampeders’ Jerome Messam leaps over a tackle during second half CFL western semifinal football action in Calgary, Sunday, Nov. 15, 2015.THE CANADIAN PRESS/Jeff McIntosh
CFL football will be played this summer in Canada

Governors vote unanimously in favour to start the ‘21 campaign on Aug. 5

Citizenship Minister Marco Mendicino holds a press conference in Ottawa on Thursday, Nov. 12, 2020. The federal government is announcing that Indigenous people can now apply to reclaim their names on passports and other government documents. THE CANADIAN PRESS/Sean Kilpatrick
Indigenous people can now reclaim traditional names on their passports and other ID

Announcement applies to all individuals of First Nations, Inuit and Métis background

This undated photo provided by Girl Scouts of New Mexico Trails shows a scout donating cookies to firefighters in Rio Rancho, New Mexico, as part of the Hometown Heroes program. As the coronavirus pandemic wore into the spring selling season, many Girl Scout troops nixed their traditional cookie booths for safety reasons. That resulted in millions of boxes of unsold cookies. (Girl Scouts of New Mexico Trails via AP)
Thinner Mints: Girl Scouts have millions of unsold cookies

Since majority of cookies are sold in-person, pandemic made the shortfall expected

In this artist’s sketch, Nathaniel Veltman makes a video court appearance in London, Ont., on June 10, 2021 as Justice of the Peace Robert Seneshen (top left) and lawyer Alayna Jay look on. THE CANADIAN PRESS/Alexandra Newbould
Terror charges laid against London attack suspect

Crown says Nathaniel Veltman’s four counts of first-degree murder constitute an act of terrorism

Indigenous Services Minister Marc Miller is seen during a news conference, Wednesday May 19, 2021 in Ottawa. THE CANADIAN PRESS/Adrian Wyld
Indigenous child-welfare battle heads to court despite calls for Ottawa to drop cases

Feds are poised to argue against two Canadian Human Rights Tribunal rulings

Most Read