Canadian inflation rate falls to 7.6% on account of lower gas prices in July

The Consumer Price Index (CPI) rose 7.6% on a year-over-year basis in July, down from an 8.1% gain in June. The deceleration was a result of slower year-over-year growth in gasoline prices, according to the latest report from Statistics Canada (StatsCan).

While gasoline prices declined on a monthly basis in July, prices for other non-durable goods like natural gas and groceries rose, StatsCan data showed. Price increases for in-person services such as flights, restaurant meals and hotel stays contributed to the month-over-month increase.

On average, price increases continued to exceed the year-over-year increase in hourly wages (+5.2%) in July. While consumer inflation continued to exceed wage growth, the gap in purchasing power was smaller than in June, according to StatsCan.

The national statistical agency said consumers paid 9.2% less for gasoline in July compared with the previous month, the largest monthly decline since April 2020. Ongoing concerns related to a slowing global economy, as well as increased COVID-19 pandemic public health restrictions in China and slowing demand for gasoline in the United States led to lower worldwide demand for crude oil, putting downward pressure on prices at the pump.

On a monthly basis, gasoline prices fell the most in Ontario (-12.2%), where the provincial government temporarily lowered the gasoline tax.

However, prices for food purchased from stores increased more on a year-over-year basis in July (+9.9%) than in June (+9.4%). Prices for bakery products (+13.6%) continued to rise at a faster pace as wheat prices remained elevated. 

Other food items also exhibited faster price growth, including non-alcoholic beverages (+9.5%), sugar and confectionery (+9.7%), preserved fruit and fruit preparations (+10.4%), eggs (+15.8%), fresh fruit (+11.7%), and coffee and tea (+13.8%).

Airfares rose 25.5% in July compared with the previous month, in the wake of strong demand for flights. Traveller accommodation prices rose 47.7% in July compared with the same month a year earlier, with prices rising the most in Ontario (+70.0%).

Year over year, prices for food purchased from restaurants (+7.3%) continued to increase at a faster rate in July compared with June.

Natural gas prices in Canada rose at a faster pace year over year in July (+42.6%) compared with June (+26.0%), driven primarily by price increases in Ontario (+45.3%). This followed the Ontario Energy Board’s approval of rate increases, which came into effect on July 1, amid sustained global demand for natural gas and uncertainty in global energy markets.

Year over year, Albertans paid 18.0% less for electricity in July, following a 35.6% increase in June, as a result of a provincial rebate beginning in July. This was the first decline in electricity prices in the province since December 2020.

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