Price increases on consumer goods including gas, food, cars and clothing eased in December, as Canada's inflation rate dropped from 2.9 per cent to 2.3.
There was a 0.6 per cent decline both against the previous month and in the annual rate. It was one of the sharpest one-month declines since the recession that hit the country in the summer of 2009.
Holiday sales had expected to slow inflation by about 0.4 per cent in December, so the larger market cooling came as a surprise to many analysts. They had, however, expected inflation to fall somewhat, and say now that it will continue to drop at a steady pace. The Bank of Canada predicted it will fall to 1.5 per cent by the year's second quarter.
In Friday's report, Statistics Canada said the sharpest decline came in gas prices. Year-over-year growth of gasoline prices dropped to 7.6 per cent, after standing at 13.5 per cent in November. The cost of gas dropped by three per cent in one month and has dropped steadily each month since June.
Also in December, inflation on food prices dropped drop 4.8 per cent to 4.4 per cent -- but staples such as meat, bread and fresh vegetables saw increases. Inflation on cars dropped about 2.3 per cent, with retailers offering discounts -- even on new models. Clothing also saw a drop in inflation, by about 5.1 per cent, likely due to Christmas sales.
Statistics Canada determines inflation, also known as its consumer price index, though the prices of eight major categories, which also include recreation, household operations and furnishings, and transportation. It said prices declined in five of those categories from month to month, but all eight were higher than the previous December.
"Transportation and food continued to post the largest increases," the agency said Friday.
The areas where inflation continued to rise were shelter and health/personal care. Inflation on alcohol and tobacco stayed about the same from November to December.
The trend of a slow-down in price increases from November to December stretched across almost all of Canada, except in Price Edward Island. Year-over-year, the highest inflation rate was in New Brunswick, which had an annual rate of 3.3 per cent in 2011. British Columbia had the lowest annual rate, at 1.7 per cent.
With files from The Canadian Press
