Inflation slows to 7.6% in July as gasoline prices fall

(Photo: The Canadian Press)

Ottawa – Canada’s annual inflation rate slowed to 7.6 percent in July, with the easing largely due to lower gasoline prices.

That’s down from June, when the consumer price index (CPI) rose 8.1% year-on-year, but economists expected inflation had slowed since then.

July posted the lowest monthly gains since December 2021, Statistics Canada said on Tuesday.

The month also marks the first fall in headline inflation since June 2020.

The federal agency said gasoline prices rose 35.6% in July from the same month last year, compared to June’s whopping 54.6% gain.

The downward pressure on prices at the pump was due to a combination of factors, including ongoing concerns about a slowing global economy, increasing COVID-19-related public health restrictions in China and slowing gasoline demand in the United States, according to Statistics Canada.

As gasoline prices fell, food prices in grocery stores rose at their fastest pace since August 1981, with prices up 9.9% year-on-year compared to 9.4% last month.

Despite lower gas prices, the “pervasiveness” of inflation in the economy means there is still work to be done before the strain on Canadians’ finances eases significantly, says Tu Nguyen, an economist at accounting and consulting firm RSM Canada.

“It will take some time before households can breathe a sigh of relief. Wage growth continues to lag inflation, resulting in a loss of purchasing power for households,” Ms Nguyen added in a note.

The average hourly wage increased by 5.2% in July compared to the previous year.

Bakery goods rose 13.6% year-on-year on rising input costs as Russia’s invasion of Ukraine continues to put upward pressure on wheat prices. Prices of other groceries also rose faster, including eggs up 15.8% and fresh fruit up 11.7% year-on-year.

As mortgage costs rise as interest rates rise, the report finds that rental prices are accelerating, rising faster in July than in the previous month.

With more Canadians traveling during the peak summer season, airfares rose about 25% in July compared to the previous month. Accommodation prices for travelers have increased nearly 50% over the past year, with the largest price increases in Ontario.

Year-on-year price growth in July was lower than in June in eight of Canada’s 10 provinces. In Quebec, the consumer price index rose 7.3% in a year in July, compared to 8.0% in New Brunswick, 8.7% in Nova Scotia and 9.5% in Île-du-Prince Edward.

As countries around the world struggle with rising prices, there are signs that inflation is beginning to ease, and the United States also saw its inflation rate fall in July.

However, inflation is well above the Bank of Canada’s target of 2%.

The central bank is monitoring these latest inflation readings as it prepares to set its next policy rate on September 7, when it is expected to raise lending rates again.

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