Inflation cooled to 2.7% in April as food price growth slowed

Jenna Benchetrit · CBC News

· Posted: May 21, 2024 8:46 AM EDT | Last Updated: May 21

Canada’s consumer price index cooled to 2.7 per cent in April, down from 2.9 per cent in March, led by the slower growth of food prices, Statistics Canada said Tuesday.

Though food prices still rose in April, they did so at a slower pace of 1.4 per cent compared with 1.9 per cent in March, the data agency said. Price growth for food bought from restaurants also eased.

The cost of meat mostly drove the decline, but other food products that also contributed were non-alcoholic beverages; bakery and cereal products; fruit, fruit preparations and nuts; and fish, seafood and other marine products.

Meanwhile, consumers paid 6.1 per cent more for gas in April after a 4.5 per cent increase in March. Statistics Canada said that a switch to summer petrol blends, supply concerns and higher federal carbon levies contributed to the uptick.

April’s figures marked the lowest inflation rate in three years, since March 2021’s 2.2 per cent.

Alberta’s sky-high rent prices an outlier

Statistics Canada also reported that in Alberta, where inflation has slowed year over year, the cost of rent rose 16.2 per cent in April,

That figure grew at a faster pace than the national rate (8.2 per cent) for the eighth month in a row, amid strong migration from elsewhere in Canada.

Tala Abu Hayyaneh, president of the student association at Mount Royal University in Calgary, said these exorbitant rent costs are pushing some students into dire living circumstances.

“Students are living with four-plus roommates in one house that costs $4,400 a month. Students are living in … housing situations like unheated garages and houses and basements that are not up to code, spaces that don’t have access to kitchen or laundry facilities,” Abu Hayyaneh said.

“The cost of living, the cost of housing is putting a pressure point on many students.”

Positive sign for central bank, but some economists on the fence

The Bank of Canada’s preferred measures of core inflation also eased — a happy sign for the central bank, which will make its next interest rate decision on June 5. Many economists expect that the bank will start cutting rates at that meeting.

“Today’s data should have provided the all clear on the inflation front that the Bank of Canada needed to start cutting interest rates in June,” CIBC senior economist Andrew Grantham wrote in a note.

“At the time of the April interest rate decision, the Bank of Canada governor stated that policy-makers were encouraged by recent subdued inflation readings, but needed those to persist for longer before cutting interest rates.”

After four consecutive months of data that point to an easing of underlying inflation, CIBC is forecasting a first rate cut at the June meeting, Grantham wrote.

Bank of Montreal chief economist Douglas Porter said in a note that while the door is still open for a June rate cut, it will be a close call — and it will be with the U.S. Federal Reserve in mind.

“When the Bank [of Canada] does eventually move, it will be gradual with a highly patient Fed acting as a limiter on how far and how fast Canadian rates can fall,” he wrote.

WATCH | Inflation edges down to 2.7 per cent in April:

Jim Thorne, chief market strategist at wealth management firm Wellington-Altus Financial, said that a rate cut in June won’t sink in for at least a year — and that the Bank of Canada went too far with its monetary policy in the first place.

“We are going to have to pay for this hangover over the next couple of years, and I really wish people would understand that monetary policy works with lags,” he said.

“If the Bank of Canada cuts today, we will not feel the effects for at least 12 to 14 months. The economic pain that we’re about to go through is in the pipeline.”