Plunging gas prices drive sharp drop in inflation

The Canadian Press Posted:Jan 20, 2012 7:22 AM ET

Inflation in Canada fell sharply last month to 2.3 per cent, as prices for most major items — from gasoline and food, to cars and clothing — plunged in December. The 0.6 per cent decline both in the annual rate, and the actual decrease in consumer prices from the previous month, was among the steepest one-month decline reported by Statistics Canada since the summer of 2009, when the country was in recession. Analysts had expected prices to cool in December due to Christmas season sales, but not by this much. The consensus was for a 0.4 per cent falloff. But it was only the scale of the decrease that was surprising, not the trend. The Bank of Canada this week predicted annual inflation would fall to about 1.5 per cent by the second quarter of this year.

Regionally, prices rose at a slower rate in every province except Prince Edward Island last month. New Brunswick posted the highest annual rate of price inflation at 3.3 per cent, while British Columbia was the lowest, at 1.7 per cent.

http://www.bankofcanada.ca/rates/price-indexes/cpi/