As gas prices plummeted in March, Canada’s annual inflation rate also fell to its lowest point in nearly five years.
On a year-over-year basis, energy costs dropped 11.6% in March – the largest one-month fall since November of 2008. Moreover, gas prices last month were 21.2% lower than they were in March 2019.
The annual inflation rate fell from 2.2% in February to 0.9% in March – the lowest it has been since May 2015. The Bank of Canada has said that inflation will probably fall to 0% between April and June of 2020.
Some analysts even suspect that negative inflation could occur in the coming months, although COVID-19-related disruptions will likely affect the accuracy of data.
“It will have been very difficult to have collected prices during the month of April.” said Bank of Montreal’s chief economist Doug Porter. “After this month, the data are going to be a little bit suspect.”
According to Statistics Canada, collection of March data was “largely unaffected by the COVID-19 pandemic, as the majority of prices were collected prior to the implementation of local travel limitations.”
The agency added that is has “adopted measures to reflect the limitations faced by Canadian consumers.” For example, cancelled flights were excluded from calculations.
Despite StatsCan’s efforts, the data it produces in the coming months will be “less representative of the actual consumer experience,” said Royce Mendes, a senior economist for CIBC. This will be due to many households not purchasing certain products during the pandemic.