While tumbling B.C. gas prices help reduce inflation, experts warn of recession

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      Statistics Canada is reporting a bit of a sag in the national and provincial economies.

      In its latest report, they say the national inflation rate was 1.5 percent in December, down from two percent the month before.

      In B.C., the inflation rate declined from 1.2 percent in November to 0.9 percent in December after some signs of a slight improvement in late 2014.

      The biggest cause? According to StatsCan analyst Julia White, it's tumbling gas prices.

      "It was the big story this month," she said in an interview today (January 23). "The year-over-year decrease in gas prices in B.C. was 9.9 percent, but it was the smallest decrease among the provinces."

      Overall, StatsCan's report said B.C. has the seventh highest inflation rate among the provinces.

      White pointed to some other areas that helped nudge inflation down in B.C.: "Alcohol purchases from stores and clothing have decreased in price in the past year, in addition to gasoline." 

      However, some industries have helped reduce our inflation's decline, or "upward contributors", as White called them. "B.C. has seen increases in prices for meat, electricity, and telephone services in the past year and this is very similar to the national level."

      While cheap gas and less inflation might help keep wallets fat for now, experts warn these could be signs of trouble in the near future.

      Dan McTeague is an analyst with GasBuddy.com, a resource that tracks prices at the pumps around Canada and the U.S.

      "[This is] not a good story, and it doesn't end here," he said. "I think we're just at the beginning of what will be a lot of bad news in succession over the next several months."

      This comes as corporations like Suncor and Shell Canada announce thousands of layoffs, but McTeague warns job losses won't be confined to the oil patch.

      "We saw this in 2008 and 2009 when oil went from $147 a barrel all the way down to $32, the consequence had an effect of some 65,000 jobs, and they were not simply confined to Alberta; they did spread a bit across the country," he said. 

      The timeline McTeague laid out starts with cheaper gas, which leads to a weakening Canadian dollar, leading to more expensive imports for things like food.

      "There's some good in the sense of immediate savings for Canadians, but then there is a whole likelihood of a declining cost of living, a secondary benefit for consumers who might save a few thousand bucks this year as a family," McTeague said. "However the likelihood of a two percent, or one percent or .5 percent drop in employment removed from our GDP will have impacts in other areas in our economy and threaten the livelihood we have currently." 

      McTeague predicts gas prices to fall even farther and warns that another recession is looming.

      Comments

      1 Comments

      ursa minor

      Jan 23, 2015 at 3:48pm

      "The timeline McTeague laid out starts with cheaper gas, which leads to a weakening Canadian dollar, leading to more expensive imports for things like food."

      If the fuel for transporting goods is cheaper, how much does the relative weakness of the dollar actually affect the price of those goods?

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