Inflation Slows to 1.7 Percent in July: StatCan

Canada’s inflation rate slowed to 1.7 percent on a year-over-year basis in July compared to 1.9 percent the month before, according to Statistics Canada.

The agency said in its Aug. 19 report that lower gasoline prices led to the decline in the Consumer Price Index (CPI), falling 16.1 percent year over year in July, compared to a 13.4 percent decline in June. 

Excluding the fall in gas prices, the CPI rose by 2.5 percent in July, similar to increases in May and June. The main drivers of the increase in costs were rise in food prices and shelter costs.

StatCan said lower gas prices were largely due to easing geopolitical tensions as Israel and Iran reached a ceasefire, as well as crude oil-producing nations increasing output.

The elimination of the consumer portion of the federal carbon tax also helped to bring down the cost of fuel on a year over year basis, as well as reducing the CPI. StatCan noted in May that the overall inflation rate fell from 2.3 percent to 1.7 percent in a month due to the removal of the carbon tax. 

Meanwhile, food prices rose at a faster pace compared to the previous month, increasing by 3.3 percent in July from 2.9 percent in June. 

Prices for candy grew by 11.8 percent and coffee prices grew by 28.6 percent, which StatCan attributed to “unfavourable weather conditions in growing regions” that reduced cocoa and coffee bean exports.

The agency also said fresh fruit prices rose by 3.9 percent year over year in July compared to 2.1 percent in June, which was largely due to higher prices for grapes (29.7 percent).

Overall, compared to five years ago, Canadians are paying 27.1 percent more for food.

StatCan also said shelter prices rose by 3 percent year over year in July compared to 2.9 percent in June, with natural gas and rent prices leading to the increase. Rental prices rose by 5.1 percent in July after increasing by 4.7 percent in June, while mortgage interest costs rose by 4.8 percent year over year in July compared to 5.6 percent in June.

Core measures of inflation have remained around the top of the Bank of Canada’s preferred range of CPI. The Bank’s preferred measures, CPI-trim and CPI-median, remained at three percent in June and 3.1 percent, respectively, in July.

The Bank said during its last interest rate decision on July 30, when it kept rates at 2.75 percent, that a weaker Canadian economy that reduced inflation further could lead to a further reduction in interest rates. Governor Tiff Macklem also said Canada’s economy was showing “some resilience” to U.S. tariffs.