Annual rate of inflation accelerates sharply to 2.6% in February as tax break ends


The annual inflation rate accelerated abruptly to 2.6 percent in February, since the federal government’s temporary tax exemption came to an end in mid -month, Statistics Canada said Tuesday.

That marks a considerable leap from the 1.9 percent increase seen in January, when Canadians saw GST and HST get a variety of basic foods, common gifts and restaurant invoices throughout the month. The February figures are far ahead of consensus among the economists surveyed by Reuters, which required an inflation of 2.2 percent in the month.

The Statistics Canada Consumer Price Index is based on the final prices paid by Canadians, which means that sales taxes are included in the agency’s calculations. Statistics Canada calculations show that, without tax exemption in place for half a month, inflation would have reached three percent in February.

With fiscal holidays still in force until February 15, restaurant food prices decreased 1.4 percent year after year. But Statistics Canada said that the reintroduction of sales tax in the middle of the month meant that dinner was contributing more to the acceleration in the general price index in February.

Alcoholic beverages, children’s clothes and toys were also included in the fiscal holidays and saw that their costs fell similarly in February, but not as much as in January.

The consumer price index increased in each province last month, with Ontario and New Brunswick facing faster accelerations.

While gasoline prices increased 0.6 percent from January to February, Statistics Canada said the annual comparison showed a slowdown last month, helping to control the general increase in inflation.

In other places, the Canadians were paying 18.8 percent more on travel tours last month, with Statistics Canada pointing to a greater demand on trips to the United States during the weekend of the president of the president to explain the price increases.

The February inflation figures do not directly reflect the imposition of tariffs or counter-aroncels between Canada and the United States, which entered into force after a series of deadlines and ads in March.

Look | Tiff Macklem about what tariffs could mean for inflation:

Tiff Macklem describes what tariffs could mean for inflation in Canada

The governor of the Bank of Canada, Tiff Macklem, who reduced the bank’s key interest rate on Wednesday, said the bank expects tariffs to affect inflation in several ways, including changes in export markets and supply chains, as well as to change national consumption and saving habits.



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