Inflation in Canada rises to 2% in January on higher food and gas prices

The cost of living increased in January to the highest annual rate in more than a year, rising to 2 per cent, Statistics Canada says.

Gasoline prices bottom out, pushing inflation rate to highest point since 2014

But the cost of fruit and vegetables rose 13 and 18 per cent respectively 2:41

The cost of living increased in January to the highest annual rate in more than a year, rising to 2 per cent, Statistics Canada said Friday.

The data agency reported that Canada's inflation rate is now at its highest level since October 2014. In December, the Consumer Price Index was 1.6 per cent.

Gas prices were the biggest contributor to the increase, as pump prices were more expensive in January than they were the same month a year earlier for the first time since the oil price slowdown that began in late 2014.

TD Bank economist Leslie Preston, however, doesn't expect that to last, as she notes that gasoline prices have declined again in February from January's level.

Higher fruit and vegetable prices were also a factor, up 18 per cent annually in January after rising 13 per cent in December. A subsector that includes broccoli, cauliflower, celery and peppers increased by more than 22 per cent, its highest since 2009.

The decreasing value of the loonie is impacting food prices perhaps more than anything else because so much of what Canadians eat is imported, or has other costs that are associated with the currency.

"This report has the weaker Canadian dollar's fingerprints all over it," BMO economist Robert Kavcic said. "Food prices surged 1.5%, with Statscan apparently finding some $8 cauliflower."

All provinces posted higher inflation rates. Newfoundland and Labrador and New Brunswick led the way with a rate of 2.4 per cent. Quebec had the lowest inflation rate at 1.6 per cent.

Provincial inflation rates
PROVINCE December (%) January (%)
Canada 1.6


N.L. 1.4 2.4
P.E.I 0.9 1.9
Nova Scotia 1.2 2.0
New Brunswick 1.1 2.4
Quebec 1.3 1.6
Ontario 1.7 2.0
Manitoba 1.5 2.1
Saskatchewan 1.8 2.2
Alberta 1.5 2.1
British Columbia 1.9 2.3

"A longstanding tug of war continues in Canada's inflation numbers," Preston noted. "On the one side, a weaker loonie is pulling up prices for goods from veggies to new cars, while lower energy prices and a slower economy are tugging price pressures down."

"We expect only modest growth in 2016, which should see inflationary pressures remain muted for quite some time. "


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