Canada’s inflation rate was 0.1% in August even as gas prices and plane tickets fell

Canada's inflation rate was 0.1% in August even as gas prices and plane tickets fell

Inflation in Canada was 0.1% in August, according to Statistics Canada, and the same level it was in July.

Economists had expected the figure to come in at around 0.4 percent, but gasoline and airline tickets cut the overall rate.

Gas prices fell 11.1 percent in August compared to a year ago. Meanwhile, air travel prices have fallen by 16 percent.

The data agency said demand for air travel has decreased during the pandemic and airlines continue to offer travel discounts to encourage return to travel.

Fuel and plane tickets became cheaper but not all. There was a 7.2 percent rise in the cost of personal care products, a category that includes things like haircuts.

“This increase is mainly due to higher prices for haircuts and haircuts, as the increased costs related to safety measures to prevent the spread of COVID-19 have been passed on to consumers,” Statskan said.

Lisa Kramer, a professor of finance at the University of Toronto, says she was not surprised that this category has seen such a price jump because the industry is dealing directly with the unprecedented impact of COVID-19.

The physical spacing requirements have seen many salons have to close their doors for several weeks in March and April, and even now that most salons have reopened their doors, they have limited capacity, reduced customer loads and additional costs for things like cleaning supplies.

“Their earnings have dwindled but their expenses have gone up so in an effort to remain able to pay off their debts, many of them have had to think of innovative solutions,” Kramer said in an interview with CBC News. “To partially compensate for that, many have applied a temporary extra fee to stay afloat.”

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Many hairdressing salons have added additional coronavirus charges to customer bills to offset the additional costs of pandemic-related precautions. (Evan Mitsui / CBC)

In fact, many have added so-called additional COVID fees to pay the extra expenses for things like personal protective equipment and intense and frequent cleaning, but companies say those fees aren’t close to letting them cover their expenses.

Lisa Friesen, owner of Vivid Hair Design and Spa in Calgary, added an additional 5 percent charge to clients’ bills, but says it’s not enough to offset the higher costs and lost revenue due to not being able to serve so many clients in the day.

“Our rents have not decreased, our taxes have not decreased, but we can see fewer clients than we did before,” she said in an interview.

“I try to stay in a positive place [that] Things will return … but it’s ruinous, it really is. “

Other prices also rose

Hairstyles aren’t the only thing getting more expensive. Jewelry prices rose 6.8 percent, largely due to standard gold prices.

There was significant variation across the country as well, with inflation being positive in five provinces, but negative in the other five.

The rate is well below the range the Bank of Canada is targeting in considering where to set the benchmark interest rate. When inflation is low, the bank tends to lower its rate to encourage borrowing for investment. When the rate is high, the bank raises its rate to calm things down.

Canada’s central bank lowered its rate in response to the COVID-19 pandemic earlier this year, and Toronto Dominion Bank economist James Marble says Wednesday’s numbers will do nothing to persuade the bank to change course anytime soon.

“With a little inflation, the Bank of Canada has no reason to change its communication that interest rates will remain low for an extended period of time in order to support a stronger economic recovery,” he said.

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