Statistics Canada building and signs are pictured in Ottawa on Wednesday, July 3, 2019. Statistics Canada is expected to report that the consumer price index decreased in April, the first full month the economy was gripped by the COVID-19 pandemic. THE CANADIAN PRESS/Sean Kilpatrick

Annual inflation rate turned negative in April, Statistics Canada reports

It was the first year-over-year decline in the CPI since September 2009

Canada’s inflation rate turned negative in April as the economy came to a standstill in the first full month of the pandemic as part of a spending shift that a top central banker says may signal further changes in consumption patterns post-COVID-19.

Statistics Canada said Wednesday the consumer price index for April fell 0.2 per cent compared with a year ago, the first year-over-year decline since September 2009.

The reading compared with a year-over-year increase of 0.9 per cent in March, when the pandemic first started to affect the broader economy.

The drop in inflation in April was fuelled by a 39.3 per cent plunge in gasoline prices the largest year-over-year decline on record. Excluding energy, Statistics Canada said CPI rose 1.6 per cent.

The price changes helped paint a portrait of what shifted last month as the pandemic drove demand for some goods and services over others.

When prices drop, consumers may start to put off buying things now in hopes of paying less in the future. When that happens, businesses can be hurt, making the economy even worse.

In an afternoon speech, Bank of Canada deputy governor Timothy Lane said many of the changes will reverse as restrictions are eased and businesses reopen, but warned of “persistent price effects” for different products and services and further changes in consumption patterns.

The central bank expects downward pressure on inflation even once restrictions have eased.

“Even if the economy as a whole bounces back quickly when the shutdown is eased, some sectors may be permanently affected,” Lane says in his speech, citing “lasting effect on travel of all kinds” and the “long-term prospects for oil demand and prices.”

Prices have moved higher in recent weeks, TD Bank senior economist James Marple wrote in a report, suggesting “the biggest of the price declines are likely in the rear-view mirror.”

Household cleaning products increased on a monthly basis by 4.6 per cent, while toilet paper fuelled an increase in the “paper supplies” category by six per cent, the largest monthly increase for that index on record.

Travel and accommodation prices fell 9.8 per cent on a yearly basis in April, the largest decline since 2011 as public health restrictions limited travel to and within Canada, the agency said.

READ MORE: Feds expand criteria for emergency loans to include family businesses, contractors

Statistics Canada said there were notable declines in locations near major tourist attractions, including Niagara Falls and the Rocky Mountains.

Food prices for rice, eggs and margarine posted “significant increases,” the agency said, coinciding with higher demand for non-perishable products as consumers were encouraged to limit shopping trips.

Prices for pork and beef increased by nine and 8.5 per cent, respectively, compared with April 2019. The change was due to a boost in sales and supply issues, including a slowdown in cross-border shipping and production cuts or temporary closures of Canadian meat processing plants, Statistics Canada said.

Lane says there is an expectation among Canadian firms of a “return to domestic manufacturing” post-pandemic.

“They expect supply chains to shrink and diversify and essential health products to be produced domestically,” he said in the prepared text of his speech. “Supply chain disruptions imply a loss of access to some markets, and consumers would likely pay more for goods and services.”

The average of Canada’s three measures for core inflation, which are considered better gauges of underlying price pressures and closely tracked by the Bank of Canada, was 1.8 per cent year-over-year.

CIBC senior economist Royce Mendes wrote in a note that the central bank will likely “look through the deflationary print” because the it didn’t reflect of the pricing environment for consumers.

“Nevertheless, with the economy likely still underperforming if and when further restrictions are lifted, there will be an underlying drag on inflation that central bankers will need to offset with additional monetary easing,” Mendes writes.

In a separate report, Statistics Canada said wholesale sales fell 2.2 per cent to $63.9 billion in March.

The overall drop came as the motor vehicle and motor vehicle parts and accessories subsector plunged 21.2 per cent, the largest monthly percentage drop since January 2009. Excluding the subsector, wholesale sales rose 2.1 per cent.

In volume terms, wholesale sales dropped 2.8 per cent.

Jordan Press and Craig Wong, The Canadian Press


Like us on Facebook and follow us on Twitter.

Want to support local journalism during the pandemic? Make a donation here.

Canadaeconomy

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Fraser Valley Regional District office on Cheam Avenue in Chilliwack reopening with restrictions in place as of Oct. 16, 2020. (Paul Henderson/Chilliwack Progress file)
FVRD to reopen corporate office on a limited basis

Fraser Valley Regional District visitors will be screened and asked to maintain physical distancing

File Photo
Ranger Station welcomes new artists in residence

Aaron Moran and Sylvana dAngelo curating a display until November 1

Single use checkout bags are one of the plastic items on the list that will be banned in Canada starting in 2021. (Citizen file)
Editorial: Federal plastic ban a good start — but just a start

Canadians toss out 3 million tonnes of plastic waste every year.

Email news@ahobserver.com
LETTER: Thank you, clean-up crew!

Murray Brown of Agassiz is impressed with recent clean-up efforts

Courtesy/Seabird Island Band
‘We want to hear from you’: Seabird Island leaders seek community plan input

Two different ways to submit ideas, open until the end of November

In this photo provided by Shannon Kiss, smoke from the CalWood Fire billows, Sunday, Oct. 18, 2020, as seen from Gunbarrel, Colo. (Shannon Kiss via AP)
‘First guys out:’ Western Canadian air tanker fleet busy despite drop in wildfires

CEO believes wildfires have become more dangerous in recent years as people live closer to where they start

Fort St. John councillor Trevor Bolin (B.C. Conservative Party)
BC Conservatives leader fights back after BC Liberals leak 2018 workplace harassment case

Sexual harassment case was connected to employee being terminated, WorkSafeBC found

Employee Sophia Lovink shows off a bag of merchandise in Toronto on Thursday, June 11, 2020. (THE CANADIAN PRESS/Nathan Denette)
Canada gets C-average grade on 2nd year of cannabis legalization

Cannabis Council of Canada releases report card on federal government and legalization

(Black Press Media files)
B.C. suburbs could see increased demand for rental units as people work from home

Vancouver’s average monthly rent is the highest out of 35 cities across Canada

The BC Ferries vessel the Queen of Oak Bay. (News Bulletin file photo)
‘Buy a boat,’ Horgan advises anti-maskers on BC Ferries

NDP leader John Horgan talks COVID-19 misinformation

Join Black Press Media and Do Some Good

Pay it Forward program supports local businesses in their community giving

Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

Canadian and American flags fly near the Ambassador Bridge at the Canada-USA border crossing in Windsor, Ont. on Saturday, March 21, 2020. Restrictions on non-essential travel between Canada and the United States are being extended until at least Nov. 21. THE CANADIAN PRESS/Rob Gurdebeke
Non-essential travel restrictions at Canada-U.S. border extended to at least Nov. 21

The restrictions do not apply to those providing essential services in either country

Most Read