Gasoline is the exception—lower gas prices are keeping the inflation rate down
By Erika Morris
According to the Bank of Canada, the prices Canadians pay for goods and services are rising more than the official inflation rate.
Statistics Canada reports that the annual pace of inflation fell to -0.4% in May, the second consecutive month in which the rate has been below zero.
The main cause of the drop is the price of gasoline, since cheaper gasoline offset price increases elsewhere. Gas prices were almost 30% lower in May 2020 than in the previous year. Without gasoline prices, the inflation rate would have been 0.7%.
In the last year, prices for car insurance, meat, mortgage interest, and restaurant food all went up. Meanwhile, prices for travel accommodations, telephone services, women’s clothing, and electricity went down.
In a video conference, Bank of Canada Deputy governor Lawrence Schembri said discrepancies between prices and inflation isn’t new, even if this time around is particularly dramatic. He also said people are spending more money on products with rising prices and less on those with falling prices.
The central bank said it will be paying close attention to spending while public health restrictions begin to ease and households start to spend more. Due to so much uncertainty about the future, the bank predicts a “recovery that will be gradual and long-lasting as this uncertainty slowly dissipates and household confidence is restored,” according to a text version of Schembri’s speech.
For now, people are still cautious about spending due to the pandemic and its economic effects. Since the pandemic started, general consumption dropped dramatically as businesses shuttered and people self-isolated.