Canada: Inflation rebounds in February--Fuel Prices Up 31%

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Wednesday, March 15, 2000 Economic News

Inflation rebounds in February

 Economic News  Forum Is Canada's economy red-hot or not?

OTTAWA, March 15 (Reuters) - Canada's annual inflation rate rebounded in February to 2.7 percent, the highest increase in prices since June 1995, reinforcing expectations that the Bank of Canada will raise interest rates next week to dampen the nation's surging economy.

Statistics Canada said on Wednesday consumer prices rose 0.5 percent in February from January, surpassing market expectations of a 0.3 percent increase in the month.

The surge in prices followed a surprising 0.1 percent dip in prices in January, when the annual inflation rate declined to 2.3 percent.

The core inflation measure, which excludes volatile food and energy prices, also climbed 0.5 percent in February, bringing the annual rate to 1.6 percent -- still well within the central bank's 1-to-3 percent inflation target range.

Analysts had forecast core inflation would increase to 1.5 percent, up from January's 1.4 percent mark.

Statistics Canada said rising energy prices were once again the main contributor to the overall index rise.

Gasoline prices rose on average by 31.3 percent in February from a year earlier, a rate not seen since 1981, while the fuel oil index rose by 63.6 percent, the largest increase since the index's inception in 1950.

Other commodities contributing to the overall increase were mortgage interest cost, food purchased from restaurants and air transportation.

The monthly price increases were also led by higher costs for fuel oil, gasoline, and air transportation -- a sector where prices rise as higher fuel costs are passed on to consumers.

Fuel oil prices rose 22.1 percent from January, while gasoline prices climbed 3.1 percent in the month.

"These (gasoline) increases are linked to higher crude oil prices due to a reduced supply by OPEC countries, dwindling refinery stockpiles, and increase oil consumption associated with winter heating needs," the federal statistics agency said.

Prices of travel services climbed 7.4 percent, while air transportation costs rose 5.4 percent.

The monthly increases were offset somewhat by a 7.3 percent decrease in the index for fresh vegetables and a 2.4 percent decline in the price of fresh fruit, as produce growing countries enjoyed favorable weather.

http://www.canoe.ca/MoneyEconomic/eco_mar15_febinflation.html

-- Carl Jenkins (Somewherepress@aol.com), March 15, 2000


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