OTTAWA: Inflation in Canada rose at its fastest pace in a decade in April, mostly due to the statistical comparison to last year when prices tanked amid early pandemic shutdowns, but also as gasoline and shelter costs rose, data showed on Wednesday.
Canada's annual inflation rate rose to 3.4%, from 2.2% in March, Statistics Canada said. Analysts polled by Reuters had expected the annual rate to rise to 3.2% in April.
A third wave of COVID-19 infections prompted many Canadian provinces to again impose strict restrictions in April, though generally not as harsh as those a year ago.
"If we can post numbers like this in lockdown with stay-at-home orders, just imagine what happens when the economy reopens. This is an across-the-board surprise," said Derek Holt, vice president of Capital Markets Economics at Scotiabank.
Gasoline prices rose 62.5% in April, the largest year-over-year increase on record. Fuel prices fell sharply in April 2020, as the pandemic limited travel and temporarily reduced international trade. Gasoline was up 1.8% on the month.
Shelter price gains also accelerated in April, rising 3.2% year-over-year compared with 2.4% in March, mostly due to demand for single-family homes. The homeowners' replacement index posted its largest gain since 1989.
Food prices acceleration slowed, rising 0.9% in April versus 1.8% in March, in part due to lower fresh vegetable costs. Canada imports many fresh fruits and vegetables, and the strong Canadian dollar makes those imports cheaper.
The Canadian dollar hit a six-year high on Tuesday. It steadied at about 1.2070 to the greenback, or 82.85 US cents, after the inflation data.
CPI common, which the Bank of Canada calls the best gauge of the economy's underperformance, was 1.7%, in line with analyst expectations. CPI median and trim both rose to 2.3%.
The Bank of Canada said last month that it expects inflation to temporarily hit the top of its 1%-to-3% control range, before returning to around 2% in the second half of the year.
The central bank has signaled it could start lifting interest rates in the second half of 2022.
"Underlying core measures are still running around (the Bank of Canada's) 2% target rate, but the more firming we see, the more likely it moves off the sidelines earlier than was expected a few months ago," said Nathan Janzen, senior economist at Royal Bank of Canada.