Inflation rate drops to 5.2% in February — but grocery prices are still up

Canada’s inflation rate cooled to 5.2 per cent in February, the largest deceleration since April 2020, according to Statistics Canada.

The agency said its consumer price index had a year-over-year deceleration from February 2022, when the inflation rate was 5.7 per cent.

The reading compared with an annual inflation rate of 5.9 per cent in January and was the lowest reading since January 2022, when it was 5.1 per cent.

Statistics Canada noted that the decline was due to a steep monthly increase in prices in February 2022, when the global economy was significantly affected by the Russian invasion of Ukraine.

Groceries outpacing overall inflation

Despite the overall cooling, grocery prices remained elevated and outpaced overall inflation.

Prices for food purchased from stores in February were up 10.6 per cent compared with a year ago, the seventh consecutive month of double-digit increases.

Supply constraints and bad weather in food growing regions continue to put upward pressure on prices. Fruit juice in particular was up 15.7 per cent — the cost of orange juice, for example, has increased due to the prevalence of fruit-killing citrus greening disease and climate-related disasters like Hurricane Ian.

Cereal products, sugar, and fish, seafood and other marine products continued to see accelerated price growth. On the other end of the spectrum, price growth for non-alcoholic beverages, meat, vegetables and veggie preparations, and bakery products slowed.

Meanwhile, energy prices were down 0.6 per cent year over year as gasoline prices fell 4.7 per cent compared with a year ago, when prices began to rise. It was the first yearly decline for gasoline prices since January 2021.

Excluding food and energy, Statistics Canada said prices in February were up 4.8 per cent compared with a year ago, following a 4.9 per cent year-over-year gain in January.

The annual inflation rate peaked at 8.1 per cent in June 2022, but has been declining.

Interest rate hikes on pause for now

The Bank of Canada, which is working to bring overall inflation back to its target of two per cent, left its key interest rate target unchanged earlier this month at 4.5 per cent.

It was the first time the central bank kept its key policy rate on hold since it began raising it last year in an effort to cool rising prices.

The average of the three core measures of inflation that are closely watched by the Bank of Canada eased to 5.37 per cent in February compared with 5.57 per cent in January.