Statistics Canada’s seasonally adjusted inflation rate fell by 0.9 per cent in March compared to February, the fastest one-month plunge in the consumer price index since the data agency started tracking the figure in 1992.
Energy prices were the biggest factor in the slowdown, as the price of energy fell by 11 per cent compared to March 2019’s level. Compared with March of last year, consumers paid 21.2 per cent less for gasoline.
But the slowdown wasn’t just due to huge drops in energy prices.
Economist Nathan Janzen at RBC noted that prices also fell, or rose less than normal for March, for products like travel services, traveler accommodation, rental of vehicles, even airfares — “all industries that were among the first to see a dramatic pullback in demand due to social/physical-distancing measures,” he said.
“Inflation is the least of anyone’s concerns at the moment, but it is notable that the mandated closure of large swathes of the economy in late March is having a profound effect on price growth,” TD economist James Marple said of the numbers. “This is yet another data series showing unprecedented movements and which will continue to do so at least through the month of April.”
Economist Doug Porter at Bank of Montreal noted that the inflation number is even more striking considering that most of the data collection was done in the first half of the month, before widespread lockdowns began. “They also indicate that April’s report will be somewhat suspect, as it has been a challenge to even collect prices this month,” he said.
Porter expects the inflation number to slow down even more from its current very low level. “Look for inflation to fall even further in coming months, with a trip into negative terrain likely for a spell,” he said.
While the drop from February from March was striking, even on an annualized basis the inflation rate slowed down. The annual rate came in at 0.9 per cent in March, down from 2.2 per cent in February. Economists had been expecting the annual rate to come in at 1.2 per cent.