Substantial Reduction In Canadian Inflation Rate Triggers Warning Of Deflation

November 21, 2008 8:07 p.m. EST

Ottawa, Ontario (AHN) - Decreasing gasoline prices has led to a substantial reduction in Canada's inflation rate. According to Statistics Canada, the country's inflation rate for October went down to 2.6 percent from 3.4 percent in September.

It is the largest monthly drop in prices in almost 50 years, triggering warnings that Canada's next economic problem may be deflation.

National Bank Financial economist Stefane Marion said, quoted by the Globe and Mail, "This morning's report is a clear indication that the current trend in price growth is down... With energy prices weakening and economic conditions deteriorating quickly in the U.S., we expect consumer prices to head lower over the first half of next year as spare capacity builds in Canada and around the world."

Aside from prices of gasoline on a downward spiral, StatsCan said the decline in car prices and women's clothes contributed to the easing of inflationary pressures.