Statistics Canada building and signs are pictured in Ottawa on Wednesday, July 3, 2019. Statistics Canada is expected to report that the consumer price index decreased in April, the first full month the economy was gripped by the COVID-19 pandemic. THE CANADIAN PRESS/Sean Kilpatrick

Annual inflation rate turned negative in April, Statistics Canada reports

It was the first year-over-year decline in the CPI since September 2009

Canada’s inflation rate turned negative in April as the economy came to a standstill in the first full month of the pandemic as part of a spending shift that a top central banker says may signal further changes in consumption patterns post-COVID-19.

Statistics Canada said Wednesday the consumer price index for April fell 0.2 per cent compared with a year ago, the first year-over-year decline since September 2009.

The reading compared with a year-over-year increase of 0.9 per cent in March, when the pandemic first started to affect the broader economy.

The drop in inflation in April was fuelled by a 39.3 per cent plunge in gasoline prices the largest year-over-year decline on record. Excluding energy, Statistics Canada said CPI rose 1.6 per cent.

The price changes helped paint a portrait of what shifted last month as the pandemic drove demand for some goods and services over others.

When prices drop, consumers may start to put off buying things now in hopes of paying less in the future. When that happens, businesses can be hurt, making the economy even worse.

In an afternoon speech, Bank of Canada deputy governor Timothy Lane said many of the changes will reverse as restrictions are eased and businesses reopen, but warned of “persistent price effects” for different products and services and further changes in consumption patterns.

The central bank expects downward pressure on inflation even once restrictions have eased.

“Even if the economy as a whole bounces back quickly when the shutdown is eased, some sectors may be permanently affected,” Lane says in his speech, citing “lasting effect on travel of all kinds” and the “long-term prospects for oil demand and prices.”

Prices have moved higher in recent weeks, TD Bank senior economist James Marple wrote in a report, suggesting “the biggest of the price declines are likely in the rear-view mirror.”

Household cleaning products increased on a monthly basis by 4.6 per cent, while toilet paper fuelled an increase in the “paper supplies” category by six per cent, the largest monthly increase for that index on record.

Travel and accommodation prices fell 9.8 per cent on a yearly basis in April, the largest decline since 2011 as public health restrictions limited travel to and within Canada, the agency said.

READ MORE: Feds expand criteria for emergency loans to include family businesses, contractors

Statistics Canada said there were notable declines in locations near major tourist attractions, including Niagara Falls and the Rocky Mountains.

Food prices for rice, eggs and margarine posted “significant increases,” the agency said, coinciding with higher demand for non-perishable products as consumers were encouraged to limit shopping trips.

Prices for pork and beef increased by nine and 8.5 per cent, respectively, compared with April 2019. The change was due to a boost in sales and supply issues, including a slowdown in cross-border shipping and production cuts or temporary closures of Canadian meat processing plants, Statistics Canada said.

Lane says there is an expectation among Canadian firms of a “return to domestic manufacturing” post-pandemic.

“They expect supply chains to shrink and diversify and essential health products to be produced domestically,” he said in the prepared text of his speech. “Supply chain disruptions imply a loss of access to some markets, and consumers would likely pay more for goods and services.”

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 1.8 per cent year-over-year.

CIBC senior economist Royce Mendes wrote in a note that the central bank will likely “look through the deflationary print” because the it didn’t reflect of the pricing environment for consumers.

“Nevertheless, with the economy likely still underperforming if and when further restrictions are lifted, there will be an underlying drag on inflation that central bankers will need to offset with additional monetary easing,” Mendes writes.

In a separate report, Statistics Canada said wholesale sales fell 2.2 per cent to $63.9 billion in March.

The overall drop came as the motor vehicle and motor vehicle parts and accessories subsector plunged 21.2 per cent, the largest monthly percentage drop since January 2009. Excluding the subsector, wholesale sales rose 2.1 per cent.

In volume terms, wholesale sales dropped 2.8 per cent.

Jordan Press and Craig Wong, The Canadian Press


Like us on Facebook and follow us on Twitter.

Want to support local journalism during the pandemic? Make a donation here.

Canadaeconomy

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

COVID-19 highlights lack of connectivity in First Nations communities

Many don’t have access required to utilize online platforms, says First Nations Technology Council

Salmon closures announced for Skeena and Nass watersheds

DFO notice expands on May 21 chinook ban throughout Skeena watershed

New traffic lanes for Six Mile west of Burns Lake coming soon

Construction to begin on lane extension and traffic improvement

Chamber names new board for 2020

And emphasizes that Houston is open for business

Houston to host high speed electric vehicle charging station

It will be installed and paid for by BC Hydro

Only four new COVID-19 cases, 228 active across B.C.

Health officials watching as activities ramp up

Feds looking at ways to reunite families amid COVID-19 border restrictions with U.S.

Some families with members of dual-citizenship have become separated due to the pandemic

Condition in kids with possible COVID-19 link being studied in Canada

This month, the U.S. Centers for Disease Control and Prevention issued an alert to doctors about MIS-C

‘I knew what he wanted’: Kootenay man spends hours in tree as black bear patrols below

Francis Levasseur is no stranger to the outdoors, but a recent run-in with a bear caused quite a scare

COVID cancelled their wedding plans, so they married on a BC mountaintop

Ceremony was live streamed to friends and family around the world

Introducing the West Coast Traveller: A voyage of the mind

Top armchair travel content for Alaska, Yukon, BC, Alberta, Washington, Oregon and California!

Trudeau acknowledges racial unrest in U.S.; ‘We also have work to do in Canada’

‘Anti-black racism, racism, is real; it’s in the United States, but it’s also in Canada,’ Trudeau says

State of Local Emergency declared for Boundary as communities brace for river flooding

Warm weather and heavy rain could cause sections of Kettle River system to swell beyond 2018 levels

Large cruise ships barred from Canadian waters until end of October: Garneau

Last year 140 cruise ships brought more than two million visitors to Canadian ports

Most Read