Inflation picks up in July to fastest pace since January: Statistics Canada

·3 min read
Grocery store in Toronto, Ontario, Canada. Food prices continue to rise in Canada meaning that more people are having to choose between paying their rent and feeding their children. Many Canadians struggle with food insecurity as the cost of living continues to rise. (Photo by Creative Touch Imaging Ltd./NurPhoto via Getty Images)
Grocery store in Toronto, Ontario, Canada. Food prices continue to rise in Canada meaning that more people are having to choose between paying their rent and feeding their children. Many Canadians struggle with food insecurity as the cost of living continues to rise. (Photo by Creative Touch Imaging Ltd./NurPhoto via Getty Images)

Inflation in Canada rose 3.7 per cent year over year in July, compared to 3.1 per cent in June to the highest since May 2011.

Statistics Canada says the Consumer Price Index (CPI) rose 0.6 per cent for the month of July, the fastest pace since January 2021.

Prices rose at a faster year-over-year pace in six of the eight major components, with shelter prices contributing the most. Meanwhile, clothing and footwear, alcoholic beverages, tobacco products and recreational cannabis slowed.

Gasoline prices rose less in July (30.9 per cent) than in June (32 per cent).

A booming housing market has been a key contributor to the economy during the pandemic, but it's also contributing to inflation.

Statistics Canada says the homeowners' replacement cost index, which is linked to the price of new homes, is up 13.8 per cent year over year in July, the largest increase since October 1987.

The other owned accommodation expenses index, which includes commission fees from real estate sales, was up 13.4 per cent year over year in July.

Also See: The latest real estate news for housing prices, mortgage rates, markets, luxury properties and more at Yahoo Finance Canada.

Food prices as an election issue

Prices for goods also rose at a faster pace. Upholstered furniture gained 13.4 per cent and automobiles were up 5.5 per cent.

Food prices increased 1.7 per cent overall. Food purchased from restaurants was up 3.1 per cent for the highest increase since January 2019, due in large part to fast food and take out (3.3 per cent).

Food purchased at a grocery store also rose (one per cent) but varied. Meat was up 3.1 per cent, dairy products rose 3.5 per cent but fresh vegetables fell 7.5 per cent and fresh fruit was down 0.6 per cent.

Professor Sylvain Charlebois with the Agri Food Analytics Lab at Dalhousie University in Halifax, says he's been trying to figure out how Statistics Canada calculates food inflation for years, noting that the CPI is an average and doesn't necessarily reflect everyone's experience at the grocery store because some products are affected differently than others.

He expects rising commodity prices, costs, and logistical issues to push food inflation possibly beyond five per cent over the next little while.

"It's really going to be a difficult fall and winter which is probably why Mr. Trudeau decided to call an election right now because he knows that there's going to be a hidden regressive tax waiting for consumers at the grocery store," Charlebois told Yahoo Finance Canada.

Inflation and the Bank of Canada

CIBC senior economist Royce Mendes says base effects replace a softer annual calculation.

"That said, the Bank of Canada's core-common component measure of underlying inflationary pressures, our preferred indicator, actually remained stable at 1.7 per cent," said Mendes.

"As a result, the central bank will likely continue to view the current overshoot as transitory, and remain focused on healing the labour market."

Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.

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