Thursday, March 19, 2009

February Inflation Rises to 1.4%

Canada's annual inflation rate rose in February to 1.4 per cent from the 1.1 per cent rate seen in January, Statistics Canada reported Thursday.

Economists had been looking for 12-month inflation to cool a bit to one per cent for February.

Higher prices for food and shelter were the primary reasons for the increase, Statistics Canada said.

Food prices increased 7.4 per cent during the 12-month period to February, following a 7.3 per cent increase in January. The main contributors to the overall jump in food costs were a 25.8 per cent hike in the price of fresh vegetables, a 9.7 per cent rise in the price of bakery and cereal products, and a 6.1 per cent increase in meat prices.

Shelter costs, the second-largest factor, increased 3.0 per cent, which was slightly less than the 3.3 per cent rise in January.

Holding inflation back was a year-over-year decline in the price Canadians were paying at the gasoline pumps. Gasoline prices in February were 19.7 per cent below levels in February last year.

Excluding gasoline, the annual inflation rate rose 2.5 per cent in the 12 months to February.

The Bank of Canada's core inflation rate — which factors out many volatile influences and is used by the central bank for the purpose of setting monetary policy, such as lending rates — advanced 1.9 per cent over the 12 months to February, identical to the increase posted in January.

David Pylyp: With declining prices in real estate, and all the talk of recession, many of the talking heads on TV (Media) are discussing deflation.  Things should be going down in price in a recession. During a recession, there should be no inflation, as we are in recession. the Bank of Canada usually increases interest rates to combat inflation. Right?

Yet here are the same people discussing the fact that although real estate values are down slightly in Toronto, vehicle prices are down, the financing options, product availability and pricing make this a good time to buy large ticket items.

What I do see happening, is a strong pend up demand from buyers that still need a place to live in Toronto and are continuing with their property search albeit carefully and with a little more prudence. Neighbourhood and indeed condominium complexes are becoming more balanced in pricing as buyers compare square footage, amenities and neighbourhood localism.

Your comments are always invited.

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