Things cost more last month, according to figures released this morning by Statistics Canada. The agency’s all-items Consumer Price Index rose 0.4% in January, slightly faster than the 0.3% rise expected by forecasters. The year-over-year rate edged up to 2.5% from 2.3% though still below the 2.9% average pace in previous six months.
Eliminating the impact of various volatile components plus indirect taxes, the so-called core measure also rose more than expected and was up 0.2% and 2.1% higher than in January 2011.
January's increases followed sharp declines of 0.6% in the headline and 0.5% in the core measure in December.
Food prices rose 0.7% in January reflecting a larger than seasonal rise in prices. On a seasonally adjusted basis, the food index rose a more modest 0.3%. Gasoline prices increased by 2.8% and electricity costs rose 1.5%. Motor vehicle prices posted a 1.8% rise in January partially offsetting December's 2.3% drop. The main offsets to these increases were falling prices for travel, natural gas and athletic gear.
"While today's report showed a stronger than expected bounce in the inflation rates," according to a report from RBC Economics, "this followed a very sharp drop in December due to heavy holiday-related discounting.
"As a result," the bank continued, "the core rate edged to just above the mid-point of the Bank's target range (2%) from just below. From a policy standpoint this does not materially change the inflation landscape.
"With inflation in line with the inflation target and headwinds still blowing in from Europe," the country’s biggest bank concludes, "we expect the Bank will maintain its current policy stance with the overnight rate expected to remain at 1.00% until 2013."
