Statistics Canada released its consumer price index (CPI) for June on July 18.
Following a 3.4% rise in May, June rose 2.8% year-on-year. However, the rate of increase has slowed and is the lowest level since March 2021.
The declaration was broad-based, with lower gasoline prices leading to a slowdown in overall inflation, but ex-gasoline inflation rose 4.0% in June, following 4.4% in May.
Food and mortgage interest rates are driving inflation. Food prices rose 9.1% and mortgage rates rose 30.1% in June. Food prices were almost flat from May’s 9.0% increase but remained the highest of all items.
Among food items, the highest increases were meat (6.9%), bakery products (12.9%), dairy products (7.4%), and other prepared foods (10.2%). Fresh fruit prices rose 10.4% year-on-year, up from 5.7% in May. Eating out was 6.6%, slightly lower than May’s 6.8%, but still contributing to the rise in CPI.
Gasoline prices in June fell 21.6% year-on-year, surpassing the 18.3% drop seen in May. Besides petrol prices, mobile phone services fell 14.7%, down from 8.7% in May. This is largely due to price drops and promotions on data plans. Internet prices also fell 3.2%. We believe that promotions mainly in Ontario and Quebec are causing the price drop.
The increase in mortgage interest rates is largely due to the Bank of Canada’s policy interest rate hike. The Bank of Canada cut its policy rate to 5% this month and will raise interest rates 10 times from March 2022.