For the past two-and-a-half years, policy makers have sought to explain why Canada, a country with sound economic fundamentals and a rock-solid banking system, was pulled down by the global spread of the U.S. financial crisis.
As a new threat bubbles up in much of the world, though, there's no need for excuses. The latest economic concern - rising inflation - has largely bypassed Canada.
Even though consumers feel the sting of surging commodity prices when they shop for food or fill their gas tanks, overall inflation is firmly in check - making the country one of the few to escape the inflationary pressures building in countries such as China and India.
Higher costs for energy and food aren't pushing other prices up because the loonie is making imported goods cheaper and a jobless rate of 7.8 per cent means employers face little pressure to give their workers raises.
In fact, the latest inflation figures from Statistics Canada suggest that, if anything, higher food and energy costs are helping keep overall inflation subdued by squeezing cost-conscious households' purchasing power for other goods. That's forcing retailers to keep a lid on prices that are already being pushed down by the currency.
Consumer prices rose 2.3 per cent from a year earlier in January, Statscan said Friday, a slightly slower rate than the month before and one that, in any case, is still getting an extra kick from the Harmonized Sales Tax introduced last summer. Year-over-year changes in core inflation - the Bank of Canada's preferred measure because it strips out energy, food and the impact of tax changes - also slowed to a 1.4-per-cent pace, well below the central bank's 2-per-cent target.
"People are on limited budgets, so if gas or food goes up, they will buy less clothing or maybe a cheaper car," said Sal Guatieri, a senior economist at BMO Nesbitt Burns Inc. in Toronto. "Unless the economy starts growing much faster than expected, or the unemployment rate falls much quicker and we start to see wage pressures building sooner than anticipated, I would not be overly worried about the inflation outlook, for at least a few more months."
Although January energy costs rose 9 per cent from a year earlier, that was slower than December's 10.5-per-cent annual pace. Intense competition among grocery chains kept food prices from climbing more than 2.1 per cent from a year earlier, and the cost of baked goods actually dropped 0.9 per cent. That result flies in the face of the notion that drought and feverish demand for wheat in developing countries would mean higher costs for Canadians.
In general, food accounts for a greater share of the consumer price index in emerging markets than in advanced economies, where households are less vulnerable to rising food costs because not as much of their budgets go toward basic necessities. Nonetheless, Canadian clothing retailers saw their prices fall 2.4 per cent from a year earlier, illustrating the combined effect that the loonie and higher prices for food and energy had on other items.
So, as emerging markets from China and Brazil scramble to curb rising food inflation, Friday's numbers give Bank of Canada Governor Mark Carney more wiggle room to keep borrowing costs on hold until about the middle of the year.
Food prices are expected to rise more quickly in the coming months, as grocers' suppliers charge more, but economists say Canadian food inflation won't even approach the price gains in places such as India, where the cost of onions, for instance, has skyrocketed 16 per cent.
And Statscan's next inflation report could show an even slower annualized pace for core prices, since February, 2010 was the month when the numbers were skewed because of hotels in Vancouver that charged exorbitant rates during the Winter Olympics.
"Inflation is dormant and steady here in Canada," Mr. Guatieri said.
The export-dependent country could be hurt by overseas inflation in other ways, however.
"The fact that food inflation is a much bigger headache for developing countries does not mean that there are no major implications for advanced nations," Kenrick Jordan, Mr. Guatieri's colleague at BMO, noted in a report Friday. "Governments in some emerging-market economies are raising interest rates and taking other steps to temper growth and curb inflation. If these measures were to unduly slow their pace of economic growth, the global economic recovery would be threatened, particularly given concerns about the sustainability of the recoveries in Europe and the United States once fiscal and monetary supports are withdrawn.''