Consumer prices held steady at 0.8% year-over-year to February in British Columbia, while retail sales saw only a 0.3% dip – the lowest decrease in the country.
Inflation was held in check primarily by gasoline prices, which, despite an increase from the 20.2% twelve-month drop in January, is still down 13.5% in the province.
Every major component of the index other than transportation, which includes gasoline, went up, with food leading the year-over-year rise at 3.3% and alcohol slightly behind at 3%.
While the 1% inflation in consumer prices for the whole country was within analyst expectations and was on the low end of the Bank of Canada’s target of 1–3%, the surprise of the morning came in the form of a 1.7% drop in Canadian retail sales in January, more than doubling the market expectation of 0.8%.
Sales were down in nine provinces, but B.C. had the lowest drop at 0.3% and the highest year-over-year increase at 4.6%. Benjamin Reitzes, BMO senior economist and vice-president of economic research says the province’s economic backdrop, which is more protected against the weakness in oil prices, should bode well for B.C. over the coming year.
Bank of Canada’s core index, which measures inflation excluding the price of high-volatility items like gasoline, went up 2.1% in the twelve months to February, down slightly from 2.2% in January.
“I think you’ll probably see continued pass-through and that will push prices higher broadly and that should keep core inflation above 2%,” Reitzes said.
He added that it’s unclear at this point whether the Bank of Canada will change interest rates as a result.
“This poses an interesting dilemma for the bank of Canada; you have persistently elevated core inflation and a weak economic backdrop. We’ll have to see which has more weight for them.”
Bank of Canada governor Stephen Poloz is set to deliver a speech at the Canada-UK Chamber of Commerce in London, U.K. March 26.
