Statistics Canada reported Friday that overall prices fell to minus 0.3 per cent over last year, fueled primarily by lower gas prices.

Don Drummond, chief economist at TD Bank Financial Group, said energy prices have seen a dramatic drop over the past year.

"It seems like a distant memory, but it was exactly a year ago that the price of world oil peaked out at US$147 (a barrel), and we're sitting here now just slightly over $62," he told CTV News Channel Friday.

"That's basically the story," added Drummond, noting that prices of other goods and services rose about 2 per cent over the past year.

Filling up at the gas station cost 24.3 per cent less this June than a year ago, despite some recent increases.

Still, some economists have warned of massive inflation in the coming months as billions in stimulus funds enter the economy, but Drummond disagreed with those predictions because he says fuel will remain cheap.

"There's an awful lot of excess supply of oil around the world right now. In fact, it often gets worse in terms of the excess supply, because as the price stays down low, we have more and more of the countries producing extra (oil) simply to keep their income going."

Still, Drummond said the economy will start to turn around later this year.

"We're getting near the bottom of the economic cycle, and I think we'll start to see growth in Canada and the rest of the world by the end of this year, but I think it'll be fairly tepid at that time," said Drummond.

He added that the excess oil supplies will have to be consumed before a major spike in inflation.

The technical terms

According to TD Economist Eric Lascalles, the current statistics represent a "technical state of deflation" that won't last.

"There's a big difference between this technical state of deflation and true deflation," Lascalles told CTV News Channel.

"True deflation is the sort where people say 'gosh, everything's going to be cheaper next week I'm not going to spend, the economy has problems as a consequence, and it goes on from there.'"

"I don't think we've got that same situation here because there just isn't the breadth of price declines," he said.

Lascalles said deflation is a symptom of troubled economic times. And while declining prices may be giving consumers greater purchasing power, he said, others aren't so lucky.

"The average person is benefiting from relatively cheaper goods and services but businesses are probably suffering in terms of their bottom line," Lascalles said.

Regionally, annual inflation is in negative territory in four provinces, with Alberta the lowest rate at minus 1.6 per cent.