Statistics Canada building and signs are pictured in Ottawa on Wednesday, July 3, 2019. Statistics Canada is expected to report that the consumer price index decreased in April, the first full month the economy was gripped by the COVID-19 pandemic. THE CANADIAN PRESS/Sean Kilpatrick

Statistics Canada building and signs are pictured in Ottawa on Wednesday, July 3, 2019. Statistics Canada is expected to report that the consumer price index decreased in April, the first full month the economy was gripped by the COVID-19 pandemic. THE CANADIAN PRESS/Sean Kilpatrick

Annual inflation rate turned negative in April, Statistics Canada reports

It was the first year-over-year decline in the CPI since September 2009

Canada’s inflation rate turned negative in April as the economy came to a standstill in the first full month of the pandemic as part of a spending shift that a top central banker says may signal further changes in consumption patterns post-COVID-19.

Statistics Canada said Wednesday the consumer price index for April fell 0.2 per cent compared with a year ago, the first year-over-year decline since September 2009.

The reading compared with a year-over-year increase of 0.9 per cent in March, when the pandemic first started to affect the broader economy.

The drop in inflation in April was fuelled by a 39.3 per cent plunge in gasoline prices the largest year-over-year decline on record. Excluding energy, Statistics Canada said CPI rose 1.6 per cent.

The price changes helped paint a portrait of what shifted last month as the pandemic drove demand for some goods and services over others.

When prices drop, consumers may start to put off buying things now in hopes of paying less in the future. When that happens, businesses can be hurt, making the economy even worse.

In an afternoon speech, Bank of Canada deputy governor Timothy Lane said many of the changes will reverse as restrictions are eased and businesses reopen, but warned of “persistent price effects” for different products and services and further changes in consumption patterns.

The central bank expects downward pressure on inflation even once restrictions have eased.

“Even if the economy as a whole bounces back quickly when the shutdown is eased, some sectors may be permanently affected,” Lane says in his speech, citing “lasting effect on travel of all kinds” and the “long-term prospects for oil demand and prices.”

Prices have moved higher in recent weeks, TD Bank senior economist James Marple wrote in a report, suggesting “the biggest of the price declines are likely in the rear-view mirror.”

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.

READ MORE: Feds expand criteria for emergency loans to include family businesses, contractors

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.

Lane says there is an expectation among Canadian firms of a “return to domestic manufacturing” post-pandemic.

“They expect supply chains to shrink and diversify and essential health products to be produced domestically,” he said in the prepared text of his speech. “Supply chain disruptions imply a loss of access to some markets, and consumers would likely pay more for goods and services.”

The average of Canada’s three measures for core inflation, which are considered better gauges of underlying price pressures and closely tracked by the Bank of Canada, was 1.8 per cent year-over-year.

CIBC senior economist Royce Mendes wrote in a note that the central bank will likely “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.

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.

Jordan Press and Craig Wong, The Canadian Press


Like us on Facebook and follow us on Twitter.

Want to support local journalism during the pandemic? Make a donation here.

Canadaeconomy

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Pioneer Arena is closing for the season. Photo: John Boivin
Castlegar’s Pioneer Arena and Nelson Civic Centre closing for season

RDCK is closing the ice at two of its arenas due to financial concerns related to COVID-19

A juvenile sturgeon in a B.C. rearing facility. The wild population in the Upper Columbia is estimated at 1,100 individuals, enhanced with roughly 5,500 hatchery fish. (file photo)
B.C.’s Upper Columbia sturgeon endure long battle with local extinction

Decades of monitoring and intervention is ongoing to save the prehistoric fish

Interior Health update. File photo.
86 new COVID-19 cases, two more deaths in Interior Health

The new deaths are from Heritage Square, a long-term care facility in Vernon

RCMP responded to a report early Friday morning of a suspect firing a gun at a Salmo home. Photo: Black Press
RCMP arrest woman who fired shots at Salmo home

The woman allegedly discharged a firearm early Friday morning

Summit Ski Hill had a delayed start to the season because of warm temperatures. Photo: Summit Ski Hill
Late season start frustrating for Nakusp ski hill

Summit Ski Hill only just opened Jan. 14

A scene from “Canada and the Gulf War: In their own words,” a video by The Memory Project, a program of Historica Canada, is shown in this undated illustration. THE CANADIAN PRESS/HO - Historica Canada
New video marks Canada’s contributions to first Gulf War on 30th anniversary

Veterans Affairs Canada says around 4,500 Canadian military personnel served during the war

A 17-year-old snowmobiler used his backcountry survival sense in preparation to spend the night on the mountain near 100 Mile House Saturday, Jan. 16, 2021 after getting lost. (South Cariboo Search and Rescue Facebook photo)
Teen praised for backcountry survival skills after getting lost in B.C.’s Cariboo mountains

“This young man did everything right after things went wrong.”

Conservative Leader Erin O’Toole holds a press conference on Parliament Hill, in Ottawa on December 10, 2020. THE CANADIAN PRESS/Sean Kilpatrick
No place for ‘far right’ in Conservative Party, Erin O’Toole says

O’Toole condemned the Capitol attack as ‘horrifying’ and sought to distance himself and the Tories from Trumpism

A passer by walks in High Park, in Toronto, Thursday, Jan. 14, 2021. This workweek will kick off with what’s fabled to be the most depressing day of the year, during one of the darkest eras in recent history. THE CANADIAN PRESS/Chris Young
‘Blue Monday’ getting you down? Exercise may be the cure, say experts

Many jurisdictions are tightening restrictions to curb soaring COVID-19 case counts

A health-care worker prepares a dose of the Pfizer-BioNTech COVID-19 vaccine at a UHN COVID-19 vaccine clinic in Toronto on Thursday, January 7, 2021. THE CANADIAN PRESS/Nathan Denette
COVID-19: Provinces work on revised plans as Pfizer-BioNTech shipments to slow down

Anita Anand said she understands and shares Canadians’ concerns about the drug company’s decision

Tourists take photographs outside the British Columbia Legislature in Victoria, B.C., on Friday August 26, 2011. A coalition of British Columbia tourism industry groups is urging the provincial government to not pursue plans to ban domestic travel to fight the spread of COVID-19. THE CANADIAN PRESS/Darryl Dyck
B.C. travel ban will harm struggling tourism sector, says industry coalition

B.C. government would have to show evidence a travel ban is necessary

(Phil McLachlan - Capital News)
‘Targeted’ shooting in Coquitlam leaves woman in hospital

The woman suffered non-life threatening injuries in what police believe to be a targeted shooting Saturday morning

JaHyung Lee, “Canada’s oldest senior” at 110 years old, received his first dose of the COVID-19 vaccine on Thursday, Jan. 14, 2021. He lives at Amenida Seniors Community in Newton. (Submitted photo: Amenida Seniors Community)
A unique-looking deer has been visiting a Nanoose Bay property with its mother. (Frieda Van der Ree photo)
A deer with 3 ears? Unique animal routinely visits B.C. property

Experts say interesting look may be result of an injury rather than an odd birth defect

Most Read