Newspaper article The Canadian Press

Inflation Rate 1.3% in July amid Lower Fuel Prices, Higher Food Costs: Statcan

Newspaper article The Canadian Press

Inflation Rate 1.3% in July amid Lower Fuel Prices, Higher Food Costs: Statcan

Article excerpt

Canada's inflation rate 1.3% in July: Statcan

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OTTAWA - The country's annual inflation rate was 1.3 per cent in July as Canadians paid more for shelter and food but less for fuel, Statistics Canada said Friday.

This overall inflation number in the federal agency's latest consumer price index came in a little weaker than the 1.5 per cent year-over-year increase in June.

Prices climbed in most major categories compared with 12 months earlier, with the cost of shelter and food items generating the biggest upward nudges on inflation, the report said.

For example, the index found that Canadians paid 9.8 per cent more for potatoes last month compared with July 2015, 10.3 per cent more for fresh or frozen fish and 15.6 per cent more for apples.

Under the shelter category, the price of electricity was 5.4 per cent higher than the year before.

In contrast, gasoline prices fell last month by 14 per cent compared to a year earlier, fuel oil dropped 13.4 per cent and natural gas slid 10.3 per cent.

The agency's core annual inflation rate, which omits some volatile items like gasoline, stayed at 2.1 per cent last month.

Dawn Desjardins, RBC's deputy chief economist, wrote in a research note to clients that she expects the gap to eventually narrow between the headline and core inflation rates -- to the point that they could merge near the two-per-cent mark, which is the Bank of Canada's ideal target.

She said the central bank has pointed to factors like low energy prices, among other things, in keeping headline inflation lower than two per cent.

"Heading into the latter part of this year, the impact of these factors will reverse lifting the headline rate, but doing little to shift the core measure from two per cent," Desjardins wrote.

"Further, reducing interest rates would undo some of the necessary cooling in housing-market activity...

"Given these factors, we expect the bank to hold the overnight rate (at) 0.5 per cent, not only through the remainder of this year but through 2017 as well."

By province, the Statistics Canada report found that Newfoundland and Labrador once again saw the highest inflation of any province last month at 3.4 per cent, which followed a 2. …

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