Statistics Canada expects COVID-19 will impact inflation, already pointing downwards, as the pandemic impacts economic activity.
Citing declining demand for travel and oil among other factors, the agency expects a notable impact on consumer prices for various goods in the foreseeable future.
“Because of these factors, as well as supply chain disruptions for consumer goods, temporary closures of some stores and service providers, the recent lowering of interest rates and the recent slowing of economic activity, the price effects of the outbreak could be more deeply felt in subsequent months,” it reads in an analysis of inflation figures released Friday.
Accounting for seasonal factors, inflation across Canada rose by 0.1 per cent in February 2020, matching the increase in January 2020.
This marginal increase merely hints at the larger trajectory of the inflation rate. Year-to-year, the Canadian inflation rate February 2020 stood at 2.2 per cent. But in the previous month, the year-to-year inflation rate stood at 2.4 per cent. The rate of increase, in other words, was slowing down, even before the escalation of the COVID-19 beyond its initial epicentre in mainland China.
A closer look at gasoline prices — a gauge of economic activity around the world — underscores this point.
“On a year-over-year basis, prices for gasoline rose less in February (up seven per cent) than in January (up 11.2 per cent), reflecting lower crude oil prices amid lower global demand following the COVID-19 outbreak at the end of January,” it reads. “Likewise, consumers paid 1.3 per cent less for fuel oil and other fuels, following an 8.1 per cent increase in January.”
Prices for fresh fruit and vegetables, no small subject of interest for Canadians, have also been stagnating, rising 1.6 per cent in February 2020, the smallest year-over-year increase since June 2018.
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Notably, consumers paid less for oranges, reflecting lower farm prices for Florida oranges due to a decline in demand, and apples, amid a North American oversupply due to foreign trade restrictions on American apples. Year-over-year growth in the fresh vegetables index (up 3.3 per cent) slowed in February, reflecting reports of a plentiful supply of cucumbers, lettuce and peppers.
Consumers, in other words, were still paying more for key items in February than they did in January, but the increases have been slowing down.
Meanwhile, the prices for other goods have been dropping. “Year over year, prices for household operations, furnishings and equipment declined for the fifth consecutive month, largely due to lower prices for telephone services and household durable goods,” it reads.
Consumers also paid lower prices for multipurpose digital devices, which includes smartphones and tablets.
These figures, likely precursors of a significant economic decline because of COVID-19, have a notable geographic aspect.
British Columbia was the only province in Canada where inflation in February 2020 actually rose compared to the previous month. It slowed everywhere else, with Prince Edward Island and Alberta recording the biggest slow-downs in inflation with drops of 0.8 per cent and 0.5 per cent respectively.
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