The annual inflation rate slowed to 1.7 per cent in April, down from 2.3 per cent in March, as gasoline and natural gas prices dropped sharply.
The latest Consumer Price Index (CPI) release shows energy prices were the main force behind the slowdown. Energy costs fell 12.7 percent, led by an 18.1 percent drop in gasoline prices. The decline follows a 1.6 percent dip in March.
The drop in fuel prices was partly due to the federal government’s removal of the consumer carbon price in several provinces, along with falling global oil prices. A slowdown in global trade and higher output from oil-producing nations, including OPEC+ members, also contributed to weaker demand and greater supply in the energy market.
Natural gas prices also fell, down 14.1 per cent in April after rising 6.4 per cent in March.
When energy is removed from the equation, the picture looks different. The CPI excluding energy rose 2.9 percent, up from a 2.5 percent gain in March, signalling continued pressure on household budgets.
Grocery bills rose 3.8 per cent year over year, while travel tours climbed 6.7 per cent.
On a monthly basis, the overall CPI declined by 0.1 per cent. When seasonally adjusted, it was down 0.2 per cent.
Transportation costs were the biggest driver behind the slower inflation, largely due to cheaper gas. The report also notes that while energy prices provided relief, other goods and services continue to rise, pointing to uneven price pressures across the economy.
Inflation is now moving further below the Bank of Canada’s 2 per cent target, after months of volatility. However, central bank officials are likely to keep a close watch on underlying inflation trends in food, shelter and services before making any decisions on interest rates.