Canadian inflation crept up in February to the highest since the start of the pandemic on rising gasoline prices.
Annual inflation quickened to 1.1 per cent last month from 1 per cent in January, Statistics Canada reported Wednesday. Economists were predicting a 1.3 per cent pickup in inflation, according to the median estimate in a Bloomberg survey. On a monthly basis, prices rose 0.5 per cent versus economist forecasts for 0.7 per cent.
Core inflation -- seen as a better measure of underlying price pressures -- remained unchanged at 1.73 per cent in February.
Inflation is expected to accelerate in coming months to well above the Bank of Canada’s 2 per cent target, but officials have warned the pickup will only be temporary. Starting with the March data, the so-called base effect will push up the headline rate, because sharp declines in prices at the start of the pandemic will influence the year-on-year calculations.
“The Bank of Canada will look past the near-term rise in headline inflation, driven as it is by volatile energy prices and the comparison to the lockdowns in the spring of last year,” James Marple, an economist at Toronto-Dominion Bank, said in a report to investors.
Gasoline prices rose for a third straight month, up 6.5 per cent in February. The rise in energy prices comes amid a recovery in global demand for gasoline, crude oil supply cuts and weather-related shutdowns in the southern U.S., Statistics Canada said.
The homeowners’ replacement cost index -- which is linked to the price of new homes -- rose 7 per cent on the year, while the mortgage interest cost index fell as more Canadians renewed or initiated mortgages at historically low rates.
Bank of Canada officials have said they expect inflation to remain in check as continued excess capacity puts downward pressure on prices.
--With assistance from Erik Hertzberg.