Inflation Edged Up to 3 Percent in July as Gas Prices Rose: StatCan

A man pumps gas in Montreal on March 4, 2022. The Canadian Press/Graham Hughes

Canada’s inflation rate rose to 3 percent in July, as higher gasoline prices were partly offset by slower growth in food prices, according to Statistics Canada.

The Consumer Price Index (CPI) rose 0.5 percent month over month in July, while on a seasonally adjusted monthly basis it rose 0.3 percent, StatCan said in a report released Aug. 17. Canada’s inflation rate had fallen to 2.8 percent in June, after reaching 3.2 percent in May.

Core inflation measures, which exclude “volatile” components like food and gasoline, remained stable in July, the agency said. CPI-median and CPI-trim hovered at two percent and 1.9 percent.

Gasoline prices rose by 25.7 percent on a year-over-year basis in July following a 20.5 percent gain the month before, according to the report.

StatCan said higher gasoline prices continued to put upward pressure on inflation amid the ongoing conflict in the Middle East and disruptions to global energy supplies.

However, grocery prices grew at a slower pace of 3.1 percent in July, compared to 3.9 percent a month earlier. However, July marked the 18th consecutive month in which grocery price inflation outpaced overall CPI inflation.

Fresh vegetables grew at a slower pace of 3.9 percent and chicken grew at 0.3 percent, while cereal prices fell by 1.7 percent. However, fresh fruit prices grew by 6.1 percent compared to 1.7 percent in June.

On a year-over-year basis, prices for travel tours rose at a faster pace in July, at 15.2 percent compared to 6.8 percent the month before. StatCan attributed the increase in travel tour prices partly to higher hotel and airfare costs during the FIFA World Cup.

Prices for air transportation also rose 12 percent year over year in July, following a 9.6 percent increase in June. Higher jet fuel costs stemming from the Middle East conflict contributed to this, StatCan said.

Inflation accelerated in every province in July, except for in Ontario, where inflation was unchanged at 2 percent, as natural gas and homeowners’ replacement costs fell. Nova Scotia had the highest rate of inflation at 5 percent in July, led by higher electricity and rent prices.

The Bank of Canada held its policy interest rate steady at 2.25 percent on July 15, and Governor Tiff Macklem said the inflation outlook for Canada remained favourable. Macklem said while inflation had risen in May due to higher gas prices, Canada was not seeing “broad spillovers of higher energy prices.”

The Bank’s July Monetary Policy Report projected inflation would ease to about 2.5 percent in the second half of 2026 before returning to the 2 percent target by early 2027, assuming oil prices and gasoline margins decline as expected. The forecast assumes oil prices will gradually decline after averaging about US$75 a barrel in the third quarter of 2026.