Gas, Oil Stoke Inflation
Higher prices at the pump and soaring natural gas costs drove the annual inflation rate up to 2.8% in January, Statistics Canada said yesterday.
That's a dramatic jump over the 2.2% inflation rate reported in December and a bit higher than analysts were expecting.
In Ottawa, the rate leaped from 2.3% to 3%.
Coming on the heels of other strong economic data, it all suggests the Bank of Canada will want to continue nudging up its trend-setting interest rate at a moderate pace to keep price pressures from rising much higher, analysts say.
Higher gas prices, as well more expensive natural gas, auto prices and homeowner replacement costs, were all major contributors to the rise in inflation last month.
Gasoline prices jumped by 19.2% in January, compared with one year earlier, while natural gas prices soared by 26% compared with January 2005, StatsCan said.
All provinces reported a rise in natural gas prices last month, ranging from an annualized increase of 27.3% in Ontario to a whopping 35.9% in Alberta, the agency said.
That doesn't seem to worry consumers too much, however. Robust retail sales figures showed Canadian shoppers continue to spend freely, encouraged by a healthy economy and strong job market.
Retail sales jumped 6.3% in 2005, including a 0.3% increase in December, StatsCan reported Tuesday.
Consumers feel confident they can afford higher energy prices and aren't curbing their spending, says David Watt, an economist with BMO Nesbitt Burns.
Overall strong economic data will encourage the central bank to gradually raise interest rates by another half a percentage point before summer, he said.
'LITTLE SLACK LEFT'
"The Bank of Canada is going to look at the data and say: 'We have little slack left in the economy, we still have relatively low interest rates, we still have a relatively strong job market, consumer spending shows absolutely no signs of weakness ... inflation not that far away from its target,' " he said. "That's consistent with modest rate increases, but nothing dramatic."
Although the inflation numbers contained no shocks for financial markets, the Canadian dollar still weakened a bit after the report. The loonie closed the day down 0.13 of a cent to trade at 87.05cents US.
The core inflation rate, which excludes many volatile food and energy costs, rose by only a small amount to 1.7% last month, from 1.6% in December.
That's the rate most closely watched by the Bank of Canada and while it's close to the central bank's 2% target, the overall figures suggest interest rates will continue to rise.
The Bank of Canada has been increasing its trend-setting overnight interest rate since last fall to keep inflation under control. The overnight rate is now 3.5% and analysOttawaSunts expect it to reach at least 4%.
The central bank's next scheduled opportunity to change interest rates comes March 7.
OttawaSun
That's a dramatic jump over the 2.2% inflation rate reported in December and a bit higher than analysts were expecting.
In Ottawa, the rate leaped from 2.3% to 3%.
Coming on the heels of other strong economic data, it all suggests the Bank of Canada will want to continue nudging up its trend-setting interest rate at a moderate pace to keep price pressures from rising much higher, analysts say.
Higher gas prices, as well more expensive natural gas, auto prices and homeowner replacement costs, were all major contributors to the rise in inflation last month.
Gasoline prices jumped by 19.2% in January, compared with one year earlier, while natural gas prices soared by 26% compared with January 2005, StatsCan said.
All provinces reported a rise in natural gas prices last month, ranging from an annualized increase of 27.3% in Ontario to a whopping 35.9% in Alberta, the agency said.
That doesn't seem to worry consumers too much, however. Robust retail sales figures showed Canadian shoppers continue to spend freely, encouraged by a healthy economy and strong job market.
Retail sales jumped 6.3% in 2005, including a 0.3% increase in December, StatsCan reported Tuesday.
Consumers feel confident they can afford higher energy prices and aren't curbing their spending, says David Watt, an economist with BMO Nesbitt Burns.
Overall strong economic data will encourage the central bank to gradually raise interest rates by another half a percentage point before summer, he said.
'LITTLE SLACK LEFT'
"The Bank of Canada is going to look at the data and say: 'We have little slack left in the economy, we still have relatively low interest rates, we still have a relatively strong job market, consumer spending shows absolutely no signs of weakness ... inflation not that far away from its target,' " he said. "That's consistent with modest rate increases, but nothing dramatic."
Although the inflation numbers contained no shocks for financial markets, the Canadian dollar still weakened a bit after the report. The loonie closed the day down 0.13 of a cent to trade at 87.05cents US.
The core inflation rate, which excludes many volatile food and energy costs, rose by only a small amount to 1.7% last month, from 1.6% in December.
That's the rate most closely watched by the Bank of Canada and while it's close to the central bank's 2% target, the overall figures suggest interest rates will continue to rise.
The Bank of Canada has been increasing its trend-setting overnight interest rate since last fall to keep inflation under control. The overnight rate is now 3.5% and analysOttawaSunts expect it to reach at least 4%.
The central bank's next scheduled opportunity to change interest rates comes March 7.
OttawaSun
posted by Ottawa Gas Prices | 9:45 PM
0 Comments:
Post a Comment
<< Home