Inflation rate holds steady at 2.2

(CBC) - Canada's annual inflation rate remained at 2.2 per cent in March as higher gasoline prices were offset by lower prices for clothing and computers, Statistics Canada said Thursday.

The March reading on inflation was unchanged from February.

The core rate of inflation, which excludes such volatile items as energy, tobacco, and fruits and vegetables, also held steady at 1.7 per cent, still well within the Bank of Canada's inflation target of one to three per cent.

"Today's inflation reading is slightly higher than expected, but hardly sends major warning alarms," BMO Nesbitt Burns deputy chief economist Doug Porter said in a morning commentary.

"The real test is whether core inflation can remain stable in the months ahead against a backdrop of soaring energy costs, surging metals prices and a tight job market," he said.

Statistics Canada said prices at the pump averaged 7.4 per cent more than a year ago, with much of that increase coming in the past month. The federal agency said gas prices jumped 5.2 per cent between February and March.

In addition to higher costs to fill up their gas tanks, consumers also paid more for their vehicles. The price for the purchase and leasing of automotive vehicles rose 3.5 per cent in March compared to one year ago, Statistics Canada said.

Homeowners' replacement cost - which Statistics Canada says represents the worn out structural portion of housing and is estimated using new housing prices excluding land - increased by six per cent between March 2005 and March 2006.

Consumers paid less for computer equipment and supplies. Prices in that sector dropped 16.7 per cent year-over-year.

The cost of clothing for both women and men was also lower. Statistics Canada said that lower prices for clothing items have been the usual trend over the last few years due to imports of cheaper clothing.

On a month-over-month basis, the consumer price index rose 0.5 per cent, again, due to rising gas prices.

© the CBC, 2006