Canada’s CPI moderates in July

Canada’s Consumer Price Index (CPI) increased by 2.5 per cent year-over-year basis in July, marking the slowest pace since March 2021, according to data released by Statistics Canada on Tuesday. This represents a slowdown from the 2.7 per cent gain recorded in June.

The broad-based deceleration in inflation was driven by lower prices for travel, vehicles, and electricity. On a month-to-month basis, the CPI rose 0.4 per cent in July, following a 0.1 per cent decline in June.

Gasoline prices increased month over month in July (+2.4 per cent), putting upward pressure on the monthly CPI figure. On a seasonally adjusted monthly basis, the CPI rose 0.3 per cent in July.

Travel Costs Cool Down

Travel-related costs were a significant contributor to the overall inflation decline. Prices for travel tours plummeted 2.8 per cent year-over-year in July, compared to a 7.4 per cent increase in June. This sharp drop was largely due to due to a base effect as travel restrictions related to the COVID-19 pandemic were lifted in July 2023. Similarly, prices for traveller accommodation (-3.7 per cent) and air transportation (-2.7 per cent) dropped year-over-year in July.

Vehicle Prices Continue to Ease

The price of passenger vehicles continued its downward trend, falling 1.4 per cent year-over-year in July. This deceleration was attributed to slower price growth for new vehicles as inventory levels improved (+1.0 per cent). Used vehicle prices also declined by 5.7 per cent in July.

Gasoline Prices Accelerate

Despite overall inflation cooling, gasoline prices increased at a faster pace in July (+1.9 per cent) compared to June. This was particularly noticeable in the Prairie provinces due to supply constraints caused by a refinery shutdown in the Midwest United States.

Shelter Costs Rise More Slowly

The rate of increase for shelter costs moderated in July (+5.7 per cent), with electricity (-0.8 per cent), mortgage interest (21.0 per cent), rent, and fuel oil prices contributing to the slowdown. Electricity prices, in particular, declined due to a base effect related to high summer demand in 2023.

Prices for fuel oil and other fuels also experienced a base-year effect, rising 3.5 per cent year over year in July following a 10.5 per cent increase in June.

Regional Variations

Inflation slowed down in five provinces compared to June. Prince Edward Island and Nova Scotia experienced the most significant deceleration primarily due to lower gasoline and fuel oil prices.

Attribution: Statistics Canada data