A one-month pop in gasoline prices propelled Canada's annual inflation rate up two notches to 2.5 per cent in January, reversing a recent trend toward moderating consumer price increases.
Pump prices climbed 2.8 per cent last month, partly due to political instability in the Middle East, contributing to upward pressure on both the monthly and annual indexes tracked by the Statistics Canada.
The agency said consumer prices overall were half a point higher in January on a seasonally adjusted basis than they were in December, almost totally reversing last month's sharp 0.6-per-cent decline — both movements coming mostly from fluctuations in the price of gasoline.
As well, underlying core inflation — which excludes volatile items such as some fresh food and gas — rose to 2.1 per cent, one tick higher than the Bank of Canada's target.
Analysts had expected the monthly and annual measures to rise, but not as sharply as occurred.
Besides the climb in gas prices during January, economists were expecting the one-point increase in the Quebec sales tax that went into effect on Jan. 1 to provide a small boost.
Another key contributor to inflation remains food, which in January cost 4.2 per cent more than a year ago, although food prices continue to moderate.
Excluding those two items, inflation would be a tepid 1.6 per cent, the agency said.
That is likely to give the Bank of Canada comfort that inflation remains well in control despite the persistent above-target readings. The central bank forecasts inflation to fall to about 1.5 per cent by mid-year.
Overall, seven of the eight major price components that Statistics Canada tracks registered increases in January, the lone exception being recreation, education and reading.
Transportation rose 3.7 per cent on an annual basis, shelter costs increased by 2.1 per cent, household operations were higher as were clothing and footwear, and alcoholic beverages and tobacco. The rising cost of food was punctuated by a 9.9-per-cent annual increase in bread, 8.3 per cent in fresh vegetables and a 6.5-per-cent hike in meat prices.
Not all items cost more in January, however. Furniture cost 3.6 per cent less last month than a year ago and video equipment dropped 9.7 per cent. Mortgage interest costs and travel tours were also slightly less expensive.
Most of the inflation occurred in Ontario and Quebec, at about half a point each, with the other provinces seeing relatively flat pricing.
Regionally, annual inflation was highest New Brunswick at 3.2 per cent last month and lowest in British Columbia, at 1.7 per cent.
Follow us on Twitter: