Higher costs at gas stations pushed Canada's overall inflation rate up to 2.4 per cent in December, a jump of 4/10ths of a point from the previous month.
Pump prices were 13 per cent higher in December compared to 12 months earlier, when the world was emerging from a deep recession, Statistics Canada reported Tuesday.
The 2.4 per cent annual gain was just under the 2.5 per cent that a consensus of analysts was expecting.
On a seasonally adjusted basis, consumer prices rose 0.3 per cent from November to December. The increase in gasoline prices was the main factor in that gain, too, the agency said.
'Today’s soft inflation report suggests there is little urgency for the Bank of Canada to lift the overnight rate from its current low level of one per cent.'—Diana Petramala , TD Bank economist
December's increases helped contribute to a general growth in consumer prices throughout 2010.
For the year, Canada's inflation rate averaged 1.8 per cent, much higher than the 0.3 per cent average in 2009, when inflation at times dipped below zero.
"For 2010 as a whole, prices increased in seven of the eight major components … the exception was clothing and footwear," the agency reported.
"Prices rebounded in the transportation and shelter components — rising in 2010 after declining in 2009 — driven by price increases for energy and passenger vehicles."
Still, economists note that inflation remains relatively tame in Canada. The much-watched Bank of Canada core index, which excludes volatile items such as energy, rose only one-tenth of a point in December to 1.5 per cent. That is still well below the central bank's desired target of two per cent.
"Inflation averaged 1.8 per cent for all of 2010, up from 0.3 per cent in 2009, but still quite tame considering the HST [harmonized sales tax] in Ontario and B.C. hiked the total by nearly 0.4 percentage points," BMO economist Doug Porter noted.
But for the energy component, so-called headline inflation would also be well-anchored below two per cent at 1.8 per cent.
Energy costs were higher across the board last month. Along with gasoline, natural gas rose 9.2 per cent from last year, electricity 6.2 per cent, and transportation costs, which are heavily influenced by gas prices, rose 4.9 per cent.
Costs of vehicles, shelter, food rise
Inflation pressures on most other items measured by Statistics Canada tended to be more moderate. Consumers paid 4.3 per cent more for passenger vehicles; 2.7 per cent more for shelter; 1.7 per cent more for food; and 1.7 per cent more for household operations, furnishings and equipment.
"The annual trend in food prices rose, but will hardly ring any alarm bells," Porter noted.
Meanwhile, mortgage interest rate costs declined 2.5 per cent in December and clothing and footwear fell by two per cent on an annual basis.
Regionally, the agency said consumer prices rose in every province last month. Ontario continues to have the highest inflation rate in the country at 3.3 per cent.
The muted core rate likely gives the Bank of Canada more leeway in holding steady on interest rates.
"Today’s soft inflation report suggests there is little urgency for the Bank of Canada to lift the overnight rate from its current low level of one per cent," TD Bank economist Diana Petramala said.
"[They have] plenty of room to remain on hold until July of this year, and when it does start to raise rates, it can move at a gradual pace.