Inflation cools to 1.1% as food price hikes slow down

Expectations were for a 1.4% increase in headline inflation, according to economists. Statistics Canada reported Friday that the consumer price index increase fell from 1.3 per cent in July. Economists polled by Reuters had been expecting the rate to inch higher, to about 1.4 per cent.

Canada’s inflation rate slowed to 1.1 per cent in August from a year earlier as food prices increased by much less than their recent pace. Prices were up in most major categories compared with a year earlier, with the cost of electricity, airfare and vehicles contribute the most to the overall inflation rate. The lone exception was clothing and footwear, which was 0.4 per cent cheaper this August than it was during the same month last year. Food prices increased 1.1 per cent during last month, after rising at an annual pace of 1.6 per cent in July.

The closely-watched core rate, which strips out the price of some volatile items, fell to 1.8 percent from 2.1 percent, its lowest rate for two years. However, those gains were offset by year-over-year price drops for gasoline, fuel oil and natural gas.

“Prices for food purchased from stores recorded their smallest year-over-year gain since June 2010, up 0.4 per cent in August,” Statistics Canada said. “On a year-over-year basis, the meat index decreased in August, after increasing in July, and the fresh fruit index posted its first decline since December 2013.”

The report said gas station sales saw their first drop in four months with a three per cent decline in July.

Gasoline prices dropped, but at a slower pace than they have in recent months. Year over year, pump prices declined by 11.5 per cent in August. In July, the decline was 14 per cent compared to the same month a year earlier.

The cost of living increased everywhere across the country, from a low of 0.1 per cent in Quebec to as high as 3 per cent in Newfoundland and Labrador.

Sales at furnishing and home furnishing stores decreased by 1.4 percent, while sales at clothing and clothing accessories stores rose by 1.6 percent.