Canada’s inflation rate moved higher than expected in July as a rebound in gasoline prices pushed overall consumer costs upward, according to figures released Monday by Statistics Canada.
The annual inflation rate climbed to three per cent last month, up from 2.8 per cent in June. Economists had generally expected the consumer price index to rise to 2.9 per cent.
While Canadians saw some relief on grocery bills, higher fuel and travel costs helped drive the increase.
Gasoline prices behind inflation increase
Statistics Canada said volatility in gasoline prices was once again the primary factor behind changes in the consumer price index.
Energy prices had cooled sharply in June after progress in peace talks between the United States and Iran helped ease pressure on global oil markets. That trend reversed in July as renewed hostilities in the Middle East pushed oil prices higher.
Excluding gasoline, the consumer price index increased 2.2 per cent in July, matching the pace recorded in each of the previous three months.
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Travel costs climbed in July
Higher fuel costs also affected travel-related expenses.
Statistics Canada reported that airfares rose 12 per cent in July, compared with a 9.6 per cent increase in June. The increase was linked in part to higher jet fuel prices.
Travel tour prices also accelerated sharply during the month. The agency said more expensive hotel stays and flights to U.S. cities hosting FIFA World Cup games contributed to the increase.
Grocery inflation shows signs of easing
The latest data also pointed to some improvement at the grocery store.
Inflation for food purchased from stores slowed to 3.1 per cent in July from 3.9 per cent a month earlier.
The cooldown was driven by slower price increases for fresh vegetables and chicken products, along with lower prices for cereal products.
Not all food categories followed that trend. Fresh fruit inflation accelerated to 6.1 per cent from 1.7 per cent in June as prices increased for berries and melons.
Even with the slowdown, grocery inflation has exceeded the overall inflation rate for 18 straight months.
Bank of Canada watching closely
The July inflation report is the final reading the Bank of Canada will receive before its next interest rate announcement on Sept. 2.
The figures will provide policymakers with another key measure of whether price pressures are easing or proving more persistent as the central bank weighs its next move.
- with files from The Canadian Press
