Is the economy growing again, or is this just more "stagflation?"
By Jeff Sanford
April inflation data has been released and there is a positive note in the news. The Bank of Canada's reached its target of 2% inflation for the first time in two years, which could mean the economy is growing again,.
Statistics Canada said that the CPI index gained half a percentage point to 2% last month from the previous year. “Ideally, the return of core and headline inflation to the 2 percent target should be the fruit of a more robust economy closer to full potential,” Sebastien Lavoie, assistant chief economist at Laurentian Bank Securities, was quoted as saying.
If inflation is rising this could mean the economy is moving out of the deflationary, weakened state of growth that has defined the economy over the last couple of years. But is the story really cheery?
The report notes the increase in inflation is driven by higher energy costs. The price of energy rose the fastest since November 2011, including a hefty 6.6% rise in the cost of gasoline and a 4.6% jump in electricity costs. Food inflation was also strong, reaching 1.9% in April. That these key items are rising suggests consumers will continue to struggle in terms of spending power that could lead to a sustainable recovery.
