Canadians got a break on inflation in March as gas prices fell and a slowdown in travel to the United States helped cool airfare costs, Statistics Canada said Tuesday.
The agency says the annual inflation rate was 2.3 per cent in the month, down from 2.6 per cent in February.
A poll provided by LSEG Data & Analytics ahead of Tuesday’s release had expected yearly inflation to hold steady month-to-month.
Statistics Canada said gas prices fell 1.6 per cent year-over-year in March, coming off a hike of 5.1 per cent in February.
The agency also pointed to a drop of 4.7 per cent annually in prices for travel tours last month following a sizeable jump over the long weekend in February.
Airfare costs were down 12 per cent year-over-year in March, Statistics Canada said, and rose only slightly month-to-month.
The agency said the cooling in flight costs came as fewer Canadians traveled to the U.S. last month, when many families typically get away for March break.
March marked more shifts in the trade war with the U.S., which has prompted some consumer backlash toward U.S. travel and products in recent weeks. It was also the first month that saw counter tariffs by the Canadian government placed on some U.S. goods.
Douglas Porter, chief economist at BMO, says that Canada’s counter-tariffs increased pressure in some product categories, but the big declines in gasoline and travel were enough to swamp those impacts.
“After a couple months of high-side surprises, Canadian inflation caught a serious March break, held down by much milder travel costs than normal,” Porter said in a note.
“This speaks to the fact that the inflation impact of the trade war is more of a two-way street for Canada than the U.S., since Canada’s tariffs are so much lighter so far, while the domestic economy is under more pressure.”
Food prices at stores increased by 3.2 per cent as well. Sébastien Mc Mahon, chief strategist at Industrial Alliance Financial Group, said tariffs might be having a slight inflationary impact on food, but agreed that tariffs weren’t enough to make any big changes in last month’s consumer price index overall.
Cellular prices were down 6.8 per cent in March from a month earlier, which Statistics Canada said was a result of lower costs for cell plans and industry-wide promotions.
Limiting the overall slowdown in inflation was the end of the federal government’s temporary tax holiday in mid February.
U.S. tariffs will make everything from groceries to manufactured goods to housing even more expensive. CBC’s Lauren Bird asks economists and personal finance experts to break down how bad things could get, and what Canadians can do to protect their finances.
March was the first full month without the federal sales tax relief on a variety of household staples and dining out, which Statistics Canada said provided some lift in the inflation figures compared with February.
Restaurant prices, for instance, rose 3.2 per cent annually in March following a 1.4 per cent decline in February.
The March inflation data comes a day before the Bank of Canada is expected to make its next interest rate decision on Wednesday. The central bank cut its benchmark rate by a quarter point to 2.75 per cent last month.
Mc Mahon says he expects that easing interest rates might lead the Bank of Canada to cut their overnight lending rate on Wednesday.
“There is less inflationary pressures. There are risks to economic growth. So that makes the job much easier for them than it was at the last meeting,” Mc Mahon said.
