Canada Annual CPI Rises 7.6% in July -- Update

By Glenn Johnson

OTTAWA--Annual inflation in Canada slipped in July below its four-decade high, driven by a deceleration in gasoline prices, but customers still paid more for most products and services.

Canada's consumer-price index in July increased 7.6% from a year ago, Statistics Canada said Tuesday, after an 8.1% gain in the previous month.

The July report matched consensus market expectations for a 7.6% rise, based on lower energy prices and large base effects. Canada's inflation was lower than in the U.S., where the CPI rose 8.5% in July.

While gasoline prices declined on a monthly basis in July, prices for other non-durable goods like natural gas and groceries continued to rise. Price increases for in-person services such as flights, restaurant meals and hotel stays contributed to the month-over-month increase, Statistics Canada said.

Excluding gasoline, prices rose 6.6% year over year in July, following a 6.5% increase in June.

On a month-over-month basis, Canada's CPI rose 0.1% in July.

Consumers paid 9.2% less for gas in July compared with the previous month, the largest monthly decline since April 2020. Concerns related to a slowing global economy, increased Covid-19 restrictions in China and slowing demand for gasoline in the U.S. led to lower demand for crude oil and downward pressure on gas prices at the pump.

On a monthly basis, gasoline prices fell the most in Ontario, where the provincial government temporarily lowered the gas tax.

The average of the Bank of Canada's preferred measures for underlying core inflation in July rose to a record 5.3%, up from a revised 4.73% in the previous month. Core inflation provides a measure of price changes that strips out volatile goods such as food and energy.

Earlier this month, the Bank of Canada surprised the markets with a full-percentage-point increase to its policy rate, lifting the target for the overnight rate to 2.5% in the biggest single hike since 1998. The hike followed half-percentage-point increases in both April and June.

Bank of Canada Gov. Tiff Macklem said in July that inflation is too high, and more people are getting more worried that high inflation is here to stay.

"We cannot let that happen. Restoring price stability--low, stable and predictable inflation--is paramount," Mr. Macklem said.

The central bank said the Canadian economy is now clearly in excess demand, and inflation is high and broadening, while the bank is projecting inflation to decline to about 3% by the end of 2023, and to return to the 2% target by the end of 2024.

The central bank's mandate is to set rate policy to achieve and maintain 2% inflation.

The Bank of Canada has said its surveys indicate more consumers and businesses are expecting inflation to be higher and last longer, meaning elevated inflation could become reflected in price- and wage-setting. That would also mean the cost of restoring price stability would be higher, said the central bank, which will meet again in September.

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(END) Dow Jones Newswires

08-16-22 0934ET