Statistics Canada reported today that consumer prices edged up by 0.1% in February on a seasonally-adjusted basis, bringing the annual inflation rate to 2.6% and the core inflation rate to 2.3%. These rates are within the Bank of Canadaâ€™s target range and should allow it to keep interest rates low, which would be appropriate given Canadaâ€™s stalled labour market.
The Labour Force Survey indicates that the average hourly wage rose at an annual rate of 2.0% to February. Working Canadians are not keeping up with the cost of living.
While the national totals changed little in February, there was a notable regional story. Among the provinces, Quebec and Ontario posted the highest inflation rates: 3.2% and 2.9% respectively. Both had wage growth of only 1.7%, the lowest rate of any province except Manitoba.
In other words, central Canadians are paying for the highest price increases out of the lowest wage increases. Over the past year, gasoline prices have risen faster in Quebec (+13.4%) and Ontario (+9.5%) than the national average (+8.9%). Ontarians were also hit by an 8.9% increase in provincial electricity rates.
UPDATE (March 24): Quoted in todayâ€™s Toronto Star (page B8)
I think it is worth emphasizing that this rise in inflation is mostly due to energy costs which has little or nothing to do with Canada’s monetary and fiscal policy.
Interesting observations on inflation from professor John T Harvey here: