Canada’s inflation rate accelerates in July, but food prices ease

CANADA’S annual inflation rate surged more than expected to 3.3 per cent in July, but core inflation measures were essentially unchanged and grocery prices increased at the slowest pace since February 2022, Statistics Canada data showed on Tuesday (Aug 15).

Analysts polled by Reuters had forecast inflation to rise to 3.0 per cent from the 27-month low of 2.8 per cent recorded in June. Month-over-month, the consumer price index was up 0.6 per cent, also higher than a forecast of a 0.3 per cent gain.

While headline inflation accelerated, the average of two of the Bank of Canada’s (BOC) core measures of underlying inflation, CPI-median and CPI-trim, came in at 3.65 per cent compared with 3.70 per cent in June.

The central bank projected in July that inflation would hover around 3 per cent for about a year, before creeping down to its 2 per cent target by mid-2025, in part due to excess demand.

Statscan said the rise in headline inflation was mainly attributable to a base-year effect in petrol prices, as a large monthly decline in July 2022 was no longer impacting the 12-month movement.

Grocery prices grew at 8.5 per cent in July, slowest pace in more than a year, mainly due to prices for fresh fruit and to a lesser extent, bakery products, Statscan said.

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Excluding food and energy, prices rose 3.4 per cent compared with a 3.5 per cent rise in June. Services prices rose 4.3 per cent annually in July, while the price of goods increased by 2.3 per cent.

The BOC, after its last rate hike in July, said it would study data closely before moving again. It will have second quarter GDP data, due on Sep 1, to take into account before the next rate announcement on Sep 6. REUTERS