Statistics Canada says May's consumer price index up 0.9 per cent from year ago | iNFOnews | Thompson-Okanagan's News Source

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Statistics Canada says May's consumer price index up 0.9 per cent from year ago

June 19, 2015 - 10:22 AM

OTTAWA - The Canadian economy sent another set of mixed signals Friday with inflation edging higher and retail sales taking a step back, suggesting the recovery continues to struggle to find its footing.

Statistics Canada said the annual pace of inflation in Canada was 0.9 per cent in May following a 0.8 per cent increase for April as higher prices for food more than offset a decline in lower energy prices.

The agency also reported that retail sales for April dropped 0.1 per cent to $42.5 billion following gains in February and March. Economists had expected an increase of 0.7 per cent.

Bank of Montreal chief economist Doug Porter said the mixed messages have been characteristic of the economy so far this year.

"That tends to happen when there are big shifts afoot and when, frankly, the economy is stumbling along at relatively slow growth," Porter said. "The main takeaway here is: inflation is still relatively muted, even with the comeback in gasoline prices, and retail spending is soft, mostly because of weakness in what had previously been the strongest areas of the country."

Porter noted the inflation data was for May, while the retail sales data was for April.

"That further complicates things a bit," he said.

Economists have been grappling with a series of see-sawing data in recent weeks after the economy contracted in the first quarter at an annual rate of 0.6 per cent.

Statistics Canada reported on Monday that factory sales contracted 2.1 per cent in April, followed by a report Wednesday that wholesale sales grew by a better-than-expected 1.9 per cent in that same month.

Royal Bank assistant chief economist Dawn Desjardins said, on balance, the recent data supports the bank's view that the economy will recover in the second quarter.

"The combination of strong housing activity and firm wholesale trade is forecast to more than compensate for a dismal performance by the manufacturing sector and soft retail sales activity in April," Desjardins wrote in a report.

On Friday, Statistics Canada said inflation ticked higher compared with a year ago as prices were up in seven of the eight major components with the increase led by higher food prices. The transportation component, which includes gasoline, was lower.

The Bank of Canada's core index, which excludes some of the most volatile items, was up 2.2 per cent in May. Economists had expected a gain of 2.1 per cent.

Energy prices were down 11.8 per cent from a year ago, led by a 17.4 per cent drop in gasoline prices. Natural gas fell 14.4 per cent and fuel oil dropped 18.6 per cent. Excluding energy prices, the consumer price index for May was up 2.2 per cent from a year ago.

The main drivers for the increase in the annual rate was a 7.9 per cent increase in meat prices while food bought in restaurants increased 2.9 per cent. Telephone services increased 5.2 per cent and passenger vehicles gained 1.8 per cent.

Home and mortgage insurance increased 8.3 per cent.

Prices were up from a year ago in nine provinces as Saskatchewan posted the largest increase with a gain of 1.5 per cent. Prince Edward Island posted its sixth consecutive year-over-year decrease.

On a seasonally adjusted monthly basis, the consumer price index increased 0.4 per cent in May following a 0.1 per cent decrease in April.

News from © The Canadian Press, 2015
The Canadian Press

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