Inflation rate cools to 1.9% in December on cheaper gas, phone plans

Canada's inflation rate fell to 1.9 per cent in December as two things consumers are used to paying more for cellphone plans and gasolinebecamecheaper.

Statistics Canada reported Friday that Canada's overall inflation rate fell by two-tenths of a percentage point from the previous month's level, exactly what economists polled by Bloombergwere expecting.

Gasoline prices were12.2 per cent higher in December compared tothe same month a year ago. But that's less than the 19.6 per cent pace in the previous month, which is the biggest reason the overall inflation rate slowed down.

The cost of shelter increased by 1.4 per cent last year and the cost of food increased by two per cent, especially fruit and vegetables whichwerealmost seven per cent more expensive.

But there was one part of the cost of living that got unexpectedly cheaperin December: wireless plans.

Telephone services dropped by 7.6 per cent in price, the biggest one-month decline on record.

That's likely because in December, the big telecom companies had a brief but furious price war after Shaw slashed the cost ofsome plans, and Bell, Rogers and Telus moved to match it prompting long lines and big delays from customers eager to sign up.

The sudden flurry of price cutting was big enough that the overall amount Canadians spent on telephone services declined on an annual basis, and was five per cent cheaper in December than a year earlier.

"This factor alone chopped 0.2 percentage points from the headline inflation result," Porter noted.