The second wave of COVID-19 infections will continue applying downward pressure on the economy
Canada’s annual inflation rate accelerated to 0.5% in September, after the 0.1% level that lingered throughout July and August, Statistics Canada said.
This was in line with economists’ predictions of the annual inflation reaching 0.5% in September. Despite the higher reading, however, inflation remained far below pre-pandemic averages.
Anna Feng, economist at The Conference Board of Canada, pointed to sustained weakness in the oil and tourism industries as the main drivers of downward pressure.
“Core inflation held steady at 1.7%, which is below the Bank of Canada’s 2% target,” Feng said. “While some consumer products have faced upward price pressure, we expect overall inflation to remain at or below the central bank’s target until mid-next year.”
Statistics Canada’s report also suggested that ongoing health protocols like physical distancing and capacity restrictions on businesses are pulling prices down – a situation that might persist for several months amid a fresh wave of COVID-19 infections.
“Changes in household consumption patterns also affected consumer prices,” The Conference Board said in its analysis. “For instance, as more Canadians work from home nowadays, buying new clothes is not deemed an essential spending anymore. As such, the suppressed demand for clothing drove its prices down 4.1% this month. Meanwhile, stronger demand for cars supported a 2.7% increase in passenger vehicle prices.”
