Canada’s annual inflation rate remained steady at three percent in August, according to Statistics Canada. The stability was attributed to a slight decrease in gasoline and food prices, offset by an increase in tour and travel costs. Additionally, shelter expenses, including rents and mortgage payments, saw a slight uptick in August.
In monthly terms, consumer prices experienced a 0.1 percent decline in August. Economists, as per a Reuters poll by LSEG Data & Analytics, had forecasted that the annual inflation rate would hold at three percent.
The latest consumer price index data does not reflect the recent surge in crude oil prices due to escalating tensions in the Middle East. National average gasoline prices have risen by approximately 21 percent year-over-year, based on data from Kalibrate. Bank of Montreal economist Benjamin Reitzes predicted that the increase in gas prices could lead to heightened inflation in September.
Conversely, RBC economist Abbey Xu noted that the impact of elevated energy costs on overall price levels has been limited so far. While certain energy-intensive categories such as air travel have shown significant price growth, this trend has not significantly affected the broader consumer basket. Xu cautioned that prolonged high oil prices could eventually lead to greater price pass-through effects.
Analyzing the August data, Reitzes highlighted a 0.2 percent decline in food prices driven by lower prices for fresh fruits and vegetables. However, he anticipates that rising fuel expenses will exert upward pressure on food prices in the upcoming months.
Both Reitzes and Xu emphasized that the latest Statistics Canada data supports their view that the Bank of Canada will maintain its current stance in the near term. Reitzes mentioned that the data does not suggest any imminent rate hikes, which should dampen speculation regarding a potential move in October. However, he pointed out that escalating oil prices remain a significant concern, having increased by nearly five percent on the day.
