MONTREAL ― Falling prices for some items gave Canada’s struggling consumers a bit of a break in March.
The country’s consumer price index fell by 0.9 per cent, the largest one-month drop in records going back to 1992, Statistics Canada reported Wednesday.
It came as large parts of the economy were shut down mid-month amid the COVID-19 outbreak.
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“What’s especially notable is that the steep slide (in prices) mostly preceded the closing of the economy,” Bank of Montreal chief economist Doug Porter noted. “StatCan tells us that most prices were collected before shutdowns began in earnest around mid-month.”
Thanks to rising prices in previous months, the consumer price index was still 0.9 per cent higher than it was a year earlier. But some things are considerably cheaper than a year ago, including gas (down 21.2 per cent), inter-city transportation (down 4.6 per cent) and recreation, education and reading (down 0.5 per cent).
Food prices fell 0.1 per cent in March, but were still 2.3 per cent higher than a year earlier.
“Notably, this was a much bigger slowdown than reported in some other major economies (like the U.S. and U.K.) despite a drop in the Canadian dollar in the month,” Porter noted. “Look for inflation to fall even further in coming months, with a trip into negative (year-on-year) terrain likely for a spell.”
CIBC economist Royce Mendes pointed to a potential problem with the inflation numbers. They are calculated based on a “basket of goods” that makes assumptions about how much of their income people spend on things. And these days, spending on common things like restaurants and air travel barely exists.
“The CPI basket will be less representative of the actual consumer experience given that much of it remains in products and services that are unlikely being purchased by most households,” Mendes wrote in a client note Wednesday.