Inflation Rises in Canada, Led by Increase in Food Prices

Strategic Insights -

The latest inflation report from Statistics Canada shows a 1.3 per cent increase in the consumer price index in July compared to the same month last year, driven by rising food prices. Economists had expected a 1.4 per cent increase. This trend of increasing food prices and decreasing gasoline prices has been observed for the third consecutive month, with experts attributing some of the price pressures to special factors.

Key Takeaways:

  • The consumer price index rose 1.3 per cent in July, compared to a 1 per cent increase in June, driven by a 3.2 per cent increase in food prices.
  • Meat prices rose 6.1 per cent, with the price of fresh or frozen beef increasing by 17.2 per cent and fresh or frozen pork gaining 2.0 per cent.
  • The transportation index, which includes gasoline, was the only one of eight components to show a decline, down 1.7 per cent compared to a year ago.
  • Gasoline prices fell 12.2 per cent, partially offset by a 2.5-per-cent increase in passenger vehicle costs.
  • Core inflation, which excludes some of the most volatile items, rose 2.4 per cent from a year ago, in line with previous estimates.
  • Core inflation has been above the 2 per cent level for 12 straight months, but the Bank of Canada has attributed this to transitory effects.
  • Retail sales in June increased 0.6 per cent to $43.2 billion, with economists predicting a slow and steady return to growth in the second half of the year.

Statistics:

  • Consumer price index increased 1.3 per cent in July compared to the same month last year.
  • Food prices increased 3.2 per cent, led by a 6.1 per cent rise in meat prices.
  • Transportation index decreased 1.7 per cent due to a 12.2 per cent drop in gasoline prices.
  • Retail sales in June increased 0.6 per cent to $43.2 billion.
  • Core inflation rose 2.4 per cent from a year ago.
  • Core inflation has been above 2 per cent for 12 straight months.

Sources:

  • Statistics Canada
  • Thomson Reuters
  • TD Bank economist Brian DePratto
  • RBC economist Nathan Janzen
  • Bank of Canada monetary policy report