Canada’s annual inflation rate remained steady at three percent in August, according to Statistics Canada’s latest report. The slight easing in gasoline and food prices was offset by an increase in costs for tours and travel. Additionally, shelter expenses, including rents and mortgage payments, saw a slight uptick during the same month.
In August, consumer prices experienced a marginal 0.1 percent decrease. This aligns with the predictions of economists surveyed by LSEG Data & Analytics, who anticipated that annual inflation would hold at three percent.
Notably, the consumer price index data released on Monday does not reflect the recent surge in crude oil prices due to escalating tensions in the Middle East. Gasoline prices have soared by approximately 21 percent year-over-year, as reported by Kalibrate’s pump price data. Economists like Benjamin Reitzes from the Bank of Montreal foresee a spike in inflation in September, fueled by rising gas prices.
However, RBC economist Abbey Xu noted that the impact of higher energy costs on broader price levels across the economy is currently limited. While energy-intensive categories such as air travel have seen significant price growth, this trend has not substantially influenced overall consumer prices. Xu warned that prolonged high oil prices could lead to increased pass-through effects on consumer prices.
Analyzing the August data, Reitzes highlighted a surprising 0.2 percent decrease in food prices, driven by lower costs of fresh fruits and vegetables. Nevertheless, he anticipates that the rise in fuel costs will eventually exert upward pressure on grocery prices, especially with diesel prices increasing.
Both Reitzes and Xu agreed that the latest Statistics Canada data supports their views that the Bank of Canada will maintain its current monetary policy stance. High oil prices, which surged by almost five percent on the day of the report, present a significant challenge and could delay any potential interest rate hikes by the central bank.