Rising food and gas prices bumped up Canada's annual inflation rate to 1.4 per cent in February, Statistics Canada reported Thursday, abating some fears about deflation.
It was the first increase in the cost of living index in five months, and was also due to rising house prices, the agency reported.
On a seasonally adjusted basis, which economists believe is a better indicator of trends in pricing, consumer prices rose 0.4 per cent in February,
The rise in the overall cost of food was fuelled by a 25.8 per cent jump in fresh vegetable prices, as well as a 9.7 per cent rise in the prices of bakery and cereal products, and a 6.1 per cent increase in meat prices.
However, those prices will recede as the weather warms up and Canadians consume domestic food products, according to economist Ian Lee.
"This is a phenomenon that goes on each year in the winter months because we have to import all of our fruits and vegetables," said Lee, an economist at Ottawa's Carleton University.
"So as a consequence, food prices typically do spike in the winter months."
Lee told Newsnet that it was also doubtful that the inflationary rise was an overall indicator of economic recovery.
"I think that we're going to see more declines in prices in the coming months, simply because consumers are retrenching because of their fear of loosing their jobs."
Meanwhile, gasoline prices rose 5.6 per cent in February over the previous month, but still remained 19.7 per cent lower than a year ago.
Core inflation - which excludes the most volatile prices - was 1.9 per cent on the year, beating economists' forecasts of 1.1 per cent.
The Bank of Canada tends to see core inflation as a better indicator than total inflation of the underlying nature of inflationary pressure.
Inflation was highest in the prairies and generally lowest in Canada's Atlantic provinces. It was the first time in two months no Canadian province experienced deflation.
The Bank of Canada has said it has a target of returning the inflation rate to 2 per cent, with Bank Governor Mark Carney saying he expects the economy to hit that target in 2011.
During a period of deflation, consumers and businesses tend to postpone purchases and investments as they wait for lower prices -- resulting in a contracting economy. As well, deflation increases debt for leveraged businesses, making it more difficult to invest.
Not all economists believe that February's surprise upswing in prices will continue into the year.
"The takeaway from this report is that while prices were surprisingly firm in February, it is unlikely to remain a theme going forward," wrote Charmaine Buskas, senior economics strategist at TD Securities in a Thursday morning note to clients.
Meny Grauman, an economist at CIBC World Markets, echoed the sentiment in a similar note to clients.
"This upward pricing pressure should be a temporary event," Grauman wrote. "Despite the monthly surprise, the 2009 economic numbers are rolling in quite a bit worse than already low expectations."
Earlier this month, the Bank of Canada cut its benchmark lending rate to a record 0.5 per cent. It also said it would consider other moves to revive the economy, if needed.
