Annual inflation rate turned negative in April

OTTAWA — Statistics Canada says the annual inflation rate turned negative in April as the economy came to a standstill in the first full month of the pandemic.

The agency said Wednesday the consumer price index for April fell 0.2 per cent compared with a year ago as gasoline prices plunged by 39.3 per cent, the largest year-over-year decline on record.

The overall drop was the first year-over-year decline in the CPI since September 2009.

The reading compared with a year-over-year increase of 0.9 per cent in March when the pandemic began.

Economists on average expected a reading of -0.1 per cent for April, according to financial markets data firm Refinitiv.

The price changes detailed by the statistics agency helped paint a portrait of how prices shifted last month as the pandemic drove demand for some goods and services over others.

Household cleaning products increased on a monthly basis by 4.6 per cent, while toilet paper fuelled an increase in the “paper supplies” category by six per cent, the largest monthly increase for that index on record.

Travel and accommodation prices fell 9.8 per cent on a yearly basis in April, the largest decline since 2011 as public health restrictions limited travel to and within Canada, the agency said.

Statistics Canada said there were notable declines in locations near major tourist attractions, including Niagara Falls and the Rocky Mountains.

Food prices for rice, eggs and margarine posted “significant increases,” the agency said, coinciding with higher demand for non-perishable products as consumers were encouraged to limit shopping trips.

Prices for pork and beef increased by nine and 8.5 per cent, respectively, compared with April 2019. The change was due to a boost in sales and supply issues, including a slowdown in cross-border shipping and production cuts or temporary closures of Canadian meat processing plants, Statistics Canada said.

CIBC senior economist Royce Mendes wrote in a note that the Bank of Canada will “look through the deflationary print” because the it didn’t reflect of the pricing environment for consumers.

“Nevertheless, with the economy likely still underperforming if and when further restrictions are lifted, there will be an underlying drag on inflation that central bankers will need to offset with additional monetary easing,” Mendes writes.

Bank of Canada deputy governor Timothy Lane is to give a speech to the CFA Society Winnipeg and Manitoba Association for Business Economics by video conference on Wednesday afternoon.

Lane’s speech is titled “Policies for the Great Global Shutdown and Beyond.”

In a separate report, Statistics Canada said wholesale sales fell 2.2 per cent to $63.9 billion in March.

The overall drop came as the motor vehicle and motor vehicle parts and accessories subsector plunged 21.2 per cent, the largest monthly percentage drop since January 2009. Excluding the subsector, wholesale sales rose 2.1 per cent.

In volume terms, wholesale sales dropped 2.8 per cent.