- Canadian price growth turned negative on a year-on-year basis in April, falling to -0.2% from +0.9% in March.
- Plummeting energy prices (-23.7% y/y), led by gasoline (-39.3% y/y) were the main contributor to the pullback in prices. Excluding energy, prices were up 1.6% from a year ago.
- Adjusting for seasonality, consumer prices fell 0.7% month-on-month. This followed a 0.9% decline in March. The two month decline of 1.6% is the biggest on record.
- The other categories seeing price declines were those most heavily-impacted by COVID-related shutdowns. Traveler accommodation was down 9.8% from a year-ago and clothing and footwear prices down 4.1%. Food prices, on the other hand, accelerated in the month to 3.4% y/y, up from 2.3% in March.
- Only one of three of the Bank of Canada’s core inflation measures moved lower in April. CPI-common fell to 1.6% (from 1.7%). CPI-median remained at 2.0%, while CPI-trim remained at 1.8%.
Key Implications
- The unprecedented economic disruption caused by COVID-19 is showing up in all facets of economic data, including prices. Hotels discounted prices heavily, but few people stayed at any price. Clothing retailers, meanwhile, dropped prices to clear inventory, but were restricted to online sales to do so, resulting in an even greater fall in sales volumes.
- Outside of these categories there is not evidence of widespread deflationary pressures in Canada. While we would caution against placing too much emphasis on the stability in core measures given the difficulty price collectors had in April (and the need to extrapolate prices for items that they could not measure), the fact remains that outside of the most impacted sectors, price growth remains positive.
- The biggest item bringing down the index – the price at the pumps – has moved higher in recent weeks. With activity slowly normalizing through May, the biggest of the price declines are likely in the rear-view mirror.
