Headline consumer price inflation in British Columbia held at low levels in March but returned to positive territory following February's negative reading. Year-over-year growth in the provincial consumer price index (CPI) rose to 0.1%, compared to -0.3% in February. In comparison, 12-month growth in the national CPI was 1.5%.
The uptick in B.C.'s CPI growth in March was led by higher energy prices, which rose 1.3% from a year ago. Gasoline prices were up 1.3%, while natural gas increased by 2.8%. The cost of insuring homes and vehicles also contributed to CPI growth. In contrast, prices fell for restaurant meals, household operations and health and personal care products and services.
Persistently low inflation in B.C. reflects sluggishness in the economy and labour markets as well as competition-driven retail disinflation, but it bears repeating that the gap between provincial and national inflation is primarily a reflection of the shift back to the PST rather than substantial differences in economic performance. The tax regime shift lowered after-tax prices for a number of goods and services in B.C. Price levels partly retraced higher since the one-time decline. Twelve-month inflation readings will be tempered by the effects of the policy change until this April. B.C. is not in a deflationary mode. Price levels have climbed on a month-to-month basis since December after adjusting for seasonal factors.
CPI inflation is forecast to pick up over the remainder of the year. In the near term, higher gas prices will lift headline inflation in April. As of this writing, prices are around $1.50 per litre, which would be up about 10% from April 2013. Meanwhile, the dampening effects of the HST-to-PST reversion will soon disappear. Over a longer time frame, inflation will also be lifted by modest improvements in the economy and labour markets, as well as a flow-through of higher import prices due to the lower Canadian dollar. Central 1 forecasts CPI inflation will reach 1.5% this year and 2.3% in 2015. •
Bryan Yu is an economist at Central 1 Credit Union.
