Canada’s inflation rate went up slightly in March compared to February, with Statistics Canada pointing out gasoline prices are partly behind the increase.
The federal agency’s consumer price index for March 2024 saw a 2.9 per cent increase compared to the year before.
In February, that measure was at 2.8 per cent, so while March saw an increase in inflation, the situation would be different if often-volatile gasoline prices are excluded from the calculation.
According to Statistics Canada, without gasoline prices, inflation actually went down slightly in March. Economists such as Pedro Antunes point out that “core” inflation, which strips out some of the more volatile and irregular prices, seems to be weaker than expected.
“That’s definitely good news,” said Antunes, chief economist with the Conference Board of Canada, who also pointed out that many inflation numbers are now getting within the Bank of Canada’s targets.
Canada’s central bank had been increasing interest rates since March 2022, with 10 rate hikes in less than two years.
Earlier this month, Bank of Canada governor Tiff Macklem said that cutting interest rates in June is “within the realm of possibilities,” but that the central bank needed to see a sustained slowdown in inflation before cutting rates.
The Bank of Canada is holding its key interest rate at 5 per cent, saying it needs to see sustained slowing of inflation before it will cut the rate. It is not ruling out a June cut.
Shelter costs up, clothing costs down
The inflation rate for services, such as air transportation, was up by 4.5 per cent. But goods — the items consumers and businesses purchase, generally speaking — was up at a far lower rate of 1.1 per cent.
Food prices rose three per cent compared with a year ago, while prices for clothing and footwear fell 2.7 per cent. Prices for household operations, furnishings and equipment dropped 2.3 per cent.
The cost to stay sheltered in Canada pushed the consumer price index upward as well, with Statistics Canada noting it “continued to apply upward pressure in March,” with both the cost of mortgage interest and rent contributing the most to the difference in inflation between March 2023 and 2024.
Shelter prices went up by 6.5 per cent in March compared to the year before, which was the same rate as February. Rent was up by 8.5 per cent year over year.
Antunes pointed out that rent costs may be seeing delayed increases compared to housing prices, which shot up at the height of the pandemic.
“Since interest rates have come up, home prices have settled. But I think rent prices in some respects are catching up to the fact that the cost of housing is so high for everyone these days,” said Antunes.
The cost to replace a home, which Statistics Canada calls the “homeowners’ replacement cost index,” declined in both February and March 2024 compared to the year before; this is related to the price of new homes.
However, the cost to carry a mortgage — essentially, interest charges — was up substantially, at 25.4 per cent in March 2024 compared to March 2023.
Mortgage interest rates have continued to show large increases in the consumer price index, as Canadians gradually renew mortgages in a higher interest rate environment than several years ago.