Canada’s inflation rate fell to 7.6% in July, according to a report released Tuesday by Statistics Canada, marking the first time in 12 months that the rate has fallen from the previous month.
In June, inflation hit a 39-year high of 8.1%, with gasoline prices being the main contributor to the overall rate increase.
In contrast, gasoline prices fell on a monthly basis in July, according to the agency’s consumer price index. Consumers paid 9.2% less for gasoline in July than in June, a monthly decline not seen since April 2020.
Ontario saw a 12.2% monthly drop in gasoline prices – the largest of any province – after the provincial government implemented a gas and fuel tax cut on May 1. July. But some consumers have already made significant lifestyle changes to offset the high costs.
“I had to sell my truck and buy a smaller car,” said Cameron Benn, a small business owner based in Brampton, Ont. “Because I was paying, per week, it was almost $300 in gas. Just gas, no insurance, nothing else. So it was like $1,200 a month just for gas.”
“I got to the point where it just didn’t make sense to have [the truck] more. So it sucks, because I love the truck, but the wallet didn’t love it, that’s for sure.”
The general downward trend, expected by economists, indicates that the surge in inflation is beginning to subside. But we are still far from the Bank of Canada’s target of 2.2%.
While inflation rose 0.1% from June, measures of core inflation rose, said Tu Nguyen, an economist at consultancy RSM Canada.
This means that “inflation remains pervasive in all aspects of life and not just concentrated in a few categories such as gasoline and food”, she said, adding that it will take “time” before households can breathe a sigh of relief.
“Wage growth continues to lag inflation, resulting in a loss of purchasing power for households. Food prices continue to rise due to the Russian invasion of Ukraine and resulting global food shortages.”
Groceries growing at fastest rate since August 1981
Even as the cost of gasoline fell, prices at grocery stores rose 9.9% year over year, their fastest pace since August 1981.
Baked goods, soft drinks, eggs and fresh fruit are some of the items with the fastest rising prices. Bakery products, in particular, rose 13.6% as the Russian invasion of Ukraine contributed to soaring wheat prices.
Higher prices for services like flights (up 25.5%), natural gas (12.4%) and hotel stays (10.1%) were notable contributors to the increase month to month due to a busier travel season.
The monthly rent is also increasing, according to the Statistics Canada report. With high interest rates pushing out buyers who cannot afford mortgages, the rental market has expanded and rental prices are accelerating at a faster rate than in June.
The Bank of Canada must continue to act: economist
Royce Mendes, an economist at Desjardins, told CBC News it was clear that “the Bank of Canada must continue to act.”
Last month, the Bank of Canada raised rates by one percentage point to 2.5%, the latest in an aggressive and ongoing campaign to rein in runaway inflation.
WATCH | Bank of Canada issues largest interest rate hike in nearly 25 years:
While more rate hikes are widely expected to come, the question is whether the bank will issue a 50 basis point hike or a 75 basis point hike.
Even with today’s declining trend annual inflation rate, it remains to be seen how far that number will fall without further action. As such, Mendes says he is cautious in stating that inflation has peaked.
“There is still a lot of inflation to come down and show up in the official statistics. And there is still a lot of uncertainty when it comes to the global economy, especially with what is happening in Ukraine and what could happen this fall,” he said. .
“So while I’m cautiously optimistic that inflation has peaked, I’m not sure it’s completely peaked.”