OTTAWA (Reuters) – Canada’s annual inflation rate fell by 0.2% in April, the first time it has hit negative territory since 2009, as the coronavirus pandemic slashed energy prices, Statistics Canada said on Wednesday.
Analysts had forecast a negative rate of 0.1% in April, down from 0.9% recorded in March. Excluding energy prices, annual inflation rose by 1.6%.
The last time Canada recorded a negative annual inflation rate was in September 2009, when prices fell by 0.9%.
But Royce Mendes, senior economist at CIBC Capital Markets, said the data was unlikely to fully capture the current situation, with non-essential businesses shuttered and people urged to stay home.
“This is not at all reflective of the pricing environment that consumers are actually facing,” Mendes said.
Food prices jumped 3.4% in April, Statscan said, as demand remained high. Prices for pantry staples like rice (+9.2%), eggs (+8.8%) and margarine (+7.9%) soared as consumers, following health officials’ recommendations to limit trips to grocery stores, turned to non-perishable food items.
“Prices for essentials matter more at this stage,” Josh Nye, senior economist at RBC Economics, said in a note. “In that sense, an increase in food prices in April likely hurts more than a drop in gasoline prices helps.”
Energy prices sank by 23.7% from April 2019. Gasoline prices plunged 39.3%, the largest year-over-year decline on record, on lower global demand for oil and a production war between Russia and Saudi Arabia.
The Canadian dollar pared its rise, touching 1.3891, or 71.99 cents U.S., after the domestic inflation data.
CPI common, which the Canadian central bank says is the best gauge of the economy’s underperformance, dipped to 1.6% from 1.7%. CPI median, which shows the median inflation rate across CPI components, stayed at 2.0%, while CPI trim, which excludes upside and downside outliers, was unchanged at 1.8%.
(Reporting by David Ljunggren and Kelsey Johnson; Editing by Bernadette Baum and Paul Simao)