Canadian inflation slowed to 7.6 percent in July, according to Statistics Canada, marking the first slowdown since last June.
The slowdown in the CPI was driven by lower gasoline prices, but the cost of food, shelter and travel-related services continued to rise month on month.
Inflation in July was slower than the 8.1 percent year-on-year jump from June, which was driven by higher gas prices. Gas prices rose 35.6 percent year-on-year in July, down from the 54.5 percent increase in June. But when the gasoline is phased out, prices in July continued to rise 6.6 percent year on year, ahead of the 6.5 percent annual increase in June. On an unadjusted monthly basis, the consumer price index rose 0.1 percent, the seventh consecutive monthly increase.
“While gasoline prices fell on a monthly basis in July, the prices of other non-durable goods such as natural gas and groceries increased,” Statistics Canada said in its statement on Tuesday, adding that increases in prices for travel-related services, including flights, also contributed. Restaurant meals and hotel stays in monthly high.
Four of the eight main components of the index saw smaller increases in July, including shelter. home operations, furnishings and equipment; clothes and shoes; and transportation.
“A Concern for the Bank of Canada’
But food prices jumped in July, up 9.2 percent year on year, and up 0.9 percent from the previous month. Prices of food purchased from groceries rose 9.9 percent year on year in July. Prices of bakery products increased by 13.6%, prices of dairy products increased by 8.9%, prices of fresh vegetables increased by 8.8%, and meat prices increased by 6.1%. Other food categories experiencing faster price growth include eggs (15.8 percent), coffee and tea (13.8 percent), fresh fruits (11.7 percent), preserved fruits and fruit preparations (10.4%), sugar and sweets (9.7 percent), and non-alcoholic beverages (9.5 per cent).
Shelter costs rose 7 percent year-on-year in July, an increase of 0.4 percent compared to June. Rent was also up 4.9 percent year over year across the country, with Prince Edward Island seeing the largest jump (9.4 percent), followed by Nova Scotia (8.4 percent) and Ontario (6.4 percent).
Travel costs also continued to rise amid strong demand. Aircraft prices increased by 25.5 percent compared to June. Accommodation prices jumped 47.7 percent annually, with prices rising the most in Ontario (70 percent) followed by Nova Scotia (64.4 percent) and British Columbia (49.8 percent).
“Canadian inflation has moved away from gas, but other elements of the July inflation story were not reassuring,” Karen Charbonneau, an economist at International Trade, said in a research note on Tuesday.
“While inflation appears to be finally beginning its long slump, accelerating inflation excluding food and energy will be a concern for the Bank of Canada.”
The Bank of Canada previously warned that inflation will likely remain at around 8 per cent over the next few months and that further interest rate increases are likely to be needed to rein in rates. The central bank has been aggressively raising interest rates since March, raising the last key rate by 100 basis points to 2.5 percent.
While the monthly inflation rate was below the Bank of Canada’s expectations, “This is not the time to be complacent,” says Desjardins economist and head of macro strategy Royce Mendez.
“The 9.2 percent drop in gasoline prices dampened price growth in other regions,” he wrote in a research note following the release of the CPI.
“Some of this inflation above target may present ongoing supply issues, but a lot of it is demand-driven and needs to be addressed by monetary authorities. So while the Bank of Canada is not going to do another 100 basis point increase, we continue to see central bankers raise rates. by another 50 basis points in September.
Elijah Sikerska is a senior correspondent for Yahoo Finance Canada. Follow her on Twitter Tweet embed.
Download the Yahoo Finance app available for apple And the Android.