OTTAWA –
Economists forecast that Canada’s inflation rate may have peaked in June as rising gasoline prices pushed the cost of living up 8.1 percent from a year ago, the hottest pace in nearly 40 years.
Statistics Canada reported on Wednesday that the annual inflation rate for June rose from 7.7 per cent in May and marked the biggest annual change since January 1983, when it hit 8.2 per cent.
The increase in the consumer price index for the month was mostly due to higher gasoline prices, which shot up more than 50 percent from a year earlier.
Excluding gasoline, inflation in the country was 6.5 percent in June, compared with 6.3 percent in May.
CIBC senior economist Karyne Charbonneau said the headline inflation was lower than expected and called it “the first negative inflation surprise in many months.”
“With gasoline prices expected to fall next month, we could finally see peak inflation,” Charbonneau said in an email.
According to retail analytics platform Kalibrate, gasoline prices have fallen from a peak of $2.14 a liter in mid-June to $1.88.
Douglas Porter, chief economist at Bank of Montreal, said June inflation was “better, but not good.”
“There will likely be some relief in next month’s report as gasoline prices are currently tracking a roughly nine percent decline in July,” he said in a report. “However, the concern is that other costs remain stable.”
“While a pullback in pump prices could calm core inflation next month, we’ll need to see a weakening of the core for inflation to really peak.”
RSM Canada economist Tu Nguyen said he still thinks it’s premature to declare that Canada has reached peak inflation.
Nguyen said there are still many uncertainties when it comes to global inflationary pressures, including the war in Ukraine and the ongoing pandemic that could halt overseas manufacturing in places like China.
In its latest monetary policy report, the Bank of Canada forecast that inflation would hover around eight percent over the next few months before beginning to ease.
Last week, the Bank of Canada stepped up its efforts against rising inflation when it raised its key interest rate by a full percentage point to 2.5 percent. This was the largest one-time increase since 1998.
Statistics Canada is scheduled to release its July inflation report on Aug. 16 ahead of the Bank of Canada’s next interest rate decision, set for Sept. 7.
CIBC said the Bank of Canada will then decide between a half-percentage-point hike or three-quarters of a percentage point, and is likely to go for the latter. But Charbonneau said June’s inflation data “may increase the chance that they will choose the lesser of two steps.”
Porter also predicted that Canada’s central bank will raise its key interest rate by half a percentage point in its next decision.
However, Nguyen said he still expects the central bank to opt for another rate hike in September.
“I think we should expect another big rate hike in September, either 75 basis points or even up to 100 basis points,” she said. “And the reason for that is … there’s no question that prices are still going up very, very quickly.”
In addition to high food and gas prices, Canadians experienced a surge in prices for travel-related services as public health restrictions were eased and travel increased. Overnight rates have risen by about 50 percent across the country compared to the previous year.
“The return of sporting events, festivals and other large in-person gatherings has led to greater demand for accommodation, particularly in major urban centres,” Statistics Canada said.
On a monthly basis, the consumer price index rose 0.7%, largely due to rising prices for gasoline and travel services.
After a slight decline in May, air transport costs rose by 6.4% on a monthly basis.
Canadians also continue to see higher food prices, with food spending up 8.8% compared to last June.
In the case of food products, the biggest increase in the prices of edible fats and oils, which have increased in price by 28.8 percent on an annual basis.
Here’s what happened in the provinces (previous month in parentheses):
- Newfoundland and Labrador: 8.2 percent (8.0)
- Prince Edward Island: 10.9 percent (11.1)
- Nova Scotia: 9.3 percent (8.8)
- New Brunswick: 9.1% (8.8)
- Quebec: 8.0 percent (7.5)
- Ontario: 7.9% (7.8)
- Manitoba: 9.4 percent (8.7)
- Saskatchewan: 8.1 percent (7.0)
- Alberta: 8.4 percent (7.1)
- British Columbia: 7.9 percent (8.1)
The agency also published rates for major cities, but warned that the figures may have varied widely as they were based on small statistical samples (the previous month in parentheses):
- St. John’s, Netherlands: 7.5 percent (7.1)
- Charlottetown-Summerside: 11.5 percent (11.7)
- Halifax: 9.1% (8.4)
- St. John, New Britain: 9.0 percent (8.6)
- Quebec City: 7.4 percent (6.7)
- Montreal: 7.6 percent (6.9)
- Ottawa: 7.7% (7.6)
- Toronto: 7.4 percent (7.4)
- Thunder Bay, Ontario: 6.6 percent (4.9)
- Winnipeg: 9.4 percent (8.5)
- Regina: 8.1 percent (7.2)
- Saskatoon: 7.6% (6.6)
- Edmonton: 8.5 percent (7.1)
- Calgary: 9.6% (8.0)
- Vancouver: 7.7 percent (8.2)
- Victoria: 8.4 percent (8.2)
- Whitehorse: 7.7 percent (7.2)
- Yellowknife: 8.3 percent (7.5)
- Iqaluit: 4.3 percent (3.5)
This report by The Canadian Press was first published on July 20, 2022
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