Inflation rate in Canada fell to 7% in August

This is the second decline in annual inflation in Canada in two months since it peaked at 8.1% last June.

As in July, this further slowdown in price increases is again mainly due to the fall in gas prices.

That means prices of goods and services in general have not fallen much, despite five consecutive interest rate hikes by the Bank of Canada this year in an attempt to stem the economy from overheating.

This is good news, however, in that theCPI excluding gasoline had not declined in over a year.

This is the first month that CPI ex-gasoline has shown a year-on-year slowdown since June 2021. »

A quote from Statistics Canada

% d’une année à l’autre en août, après avoir affiché une augmentation de 6,6% en juillet”,”text”:”Sans l’essence, les prix se sont accrus de 6,3% d’une année à l’autre en août, après avoir affiché une augmentation de 6,6% en juillet”}}”>Ex-gasoline prices rose 6.3% yoy in August after rising 6.6% in Julystate the federal agency.

Still without gasoline, it was mainly transport (+10.3%) and housing (+6.6%) that were responsible for the slowdown in price growth last August. The rise in prices of non-durable consumer goods also slowed (+10.8%), as did those of durable goods, in particular cars and household appliances (+6%).

However, the steady rise in food prices (+10.8%) dampened inflation gains made over the past month.

%) ont affiché l’augmentation la plus marquée depuis août 1981 (+11,9%)”,”text”:”Les prix des aliments achetés en magasin (+10,8%) ont affiché l’augmentation la plus marquée depuis août 1981 (+11,9%)”}}”>Grocery prices (+10.8%) recorded the largest increase since August 1981 (+11.9%)underlines Statistics Canada in its monthly report.

We can see that inflation probably peaked in June. That was down a bit in July and there it’s falling further in August with inflation at 7%. It’s goodexplained on Tuesday morning the chief economist of Desjardins, Benoit Durocher, on the waves of ICI RDI.

If we look at food and energy […] it continues to rise, but for the past few months it has been increasing at a slower pace and it’s still encouraging news. »

A quote from Benoit Durocher, Senior Economist at Mouvement Desjardins

Gasoline is still falling

Gasoline prices at the pump continued their slow decline in August after rising to over $2 a liter last spring during Russia’s invasion of Ukraine.

From August 2021 to August 2022, the price of gasoline increased by 22.1%, while in July this increase reached 35.6% year-on-year.

%, après avoir diminué de 9,2% en juillet. Il s’agit de la plus forte baisse mensuelle observée depuis avril2020″,”text”:”D’un mois à l’autre, les prix de l’essence ont reculé de 9,6%, après avoir diminué de 9,2% en juillet. Il s’agit de la plus forte baisse mensuelle observée depuis avril2020″}}”>On a monthly basis, gasoline prices fell 9.6% after falling 9.2% in July. This is the biggest monthly drop since April 2020.notes Statistics Canada.

wages

As prices of food, goods and services continue to rise, the average hourly wage also increased by 5.4% compared to August 2021, less than the 7% average month-on-month price increase, again on an annualized basis.

Although Canadian purchasing power has declined, the gap was less pronounced than in Julystate the federal agency.

Further rate hikes will follow

For Desjardins Group economist Benoit Durocher, the successive rate hikes triggered by the Bank of Canada’s policy rate will certainly have a visible effect on inflation, but he believes there is still work to be done.

% […] Ça demeure un niveau très élevé, prévient-il. Les risques sont toujours orientés à la hausse au niveau de l’inflation.”,”text”:”Je pense que la Banque du Canada ne prendra aucune chance. Sa priorité c’est la lutte à l’inflation et on est quand même à une inflation 7% […] Ça demeure un niveau très élevé, prévient-il. Les risques sont toujours orientés à la hausse au niveau de l’inflation.”}}”>I don’t think the Bank of Canada will take any chances. Their priority is fighting inflation and we are still at 7% inflation […] It remains a very high level, he warns. Inflation risks remain on the upside.

In that regard, I don’t think Bank of Canada will take any chances. [..] Expect another hike in interest rates for the October meeting; possibly 50 basis points, which is still slightly less pronounced than the last two increases.

It will also be important for the Bank of Canada to monitor how the economy reacts to these successive rate hikes. because we’re starting to see signs of weakness in the Canadian and Quebec economieswarns Mr. Durocher.

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