Canada’s inflation rate in May was the slowest since June 2010 as energy costs declined, supporting the central bank’s projection for modest output and price gains.
The consumer price index rose 1.2% in May from a year ago, compared with a 2% gain the prior month, Statistics Canada said today from Ottawa. The core rate, which excludes eight volatile products, increased 1.8% after an April gain of 2.1%. Economists surveyed by Bloomberg forecast a 1.5% rise in consumer prices and a 1.9% gain in the core.
Bank of Canada Governor Mark Carney said yesterday that inflation will slip below 2% in the short term because of lower gasoline prices. At the same time, he reiterated that it "may become appropriate" to raise his key 1% interest rate for the first time since September 2010 as the economy moves gradually toward full output.
Gasoline prices fell 2.3% in May from a year earlier, the first decline in 23 months, Statistics Canada said, and natural gas costs dropped 16.6%.
Inflation in May was also restrained by a 0.3% decrease in clothing costs following April’s 2.4% increase, while fresh vegetable costs dropped 7.1%
On a monthly basis, total inflation fell 0.1% in May and the core rate rose 0.2% Economists surveyed by Bloomberg predicted total monthly inflation would rise 0.1%and the core rate would advance 0.3%.
Seasonally adjusted inflation fell 0.2% in May while the adjusted core rate was unchanged.
Other reports this month have shown a decline in retail sales, slower housing starts and falling exports. Carney yesterday said the expansion this year may be slower than the 2.4% pace he forecast in April.
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