Fresh inflation figures showing price pressures rebounded lower last month are boosting odds among economists and market watchers that the Bank of Canada will deliver another interest rate cut next week.Statistics Canada’s consumer price index (CPI) reported an annual inflation rate of 2.7 per cent in June. That follows a surprise uptick to 2.9 per cent in May.
Relief in gasoline prices was cited as the main reason for the annual decline. Gas prices were down 3.1 per cent month-to-month, the second consecutive month of lower prices at the pump.
Prices for travel tours were also down 11.1 per cent on a monthly basis, while cellular service costs fell 12.8 per cent annually.
Many durable goods saw outright price declines in the annual CPI, StatCan noted.
Passenger vehicle prices were down 0.4 per cent year-over-year, marking the largest annual decline since February 2015. Used vehicles in particular drove the cooling in this segment, with improved inventory levels driving down prices 4.5 per cent year-over-year following a rapid run-up during the COVID-19 pandemic.
Easing supply chains also helped the price of furniture fall 3.9 per cent annually in June, StatCan said. The agency also pointed to higher interest rates reining in consumer spending, with dwindling demand potentially driving prices lower.
But the pace of price hikes at the grocery store picked up for the second month in a row, rising 2.1 per cent year-over-year. On a three-year basis, grocery prices are up 21.9 per cent.
Price hikes were accelerating on a yearly basis for dairy products (up 2.0 per cent), fresh vegetables (up 3.8 per cent) and non-alcoholic beverages (up 5.6 per cent), as well as preserved fruit and fruit preparations (up 9.5 per cent). Shoppers looking to save money on fruit might’ve gone to the fresh section, however, where prices were down 5.2 per cent annually.
Dawn Desjardins, chief economist at Deloitte Canada, tells Global News that while food inflation might flare up from time to time, the pace of the past few months is nothing like the double-digit price hikes seen during the peaks in recent years.
“We do expect to see some blips. This has been a modest acceleration, but still running well below where we were in the very worst of our inflation uptick,” she says.
Shelter prices were also up 6.2 per cent year-over-year, marking a step down from 6.4 per cent in the month before. Rents and mortgage interest costs are continuing to put the heat on household finances, Desjardins says, despite some cooling in StatCan’s mortgage index and easing in home prices.
“But on balance, the shelter part of Canada’s CPI basket continues to run very hot and it is obviously a big strain for consumers,” she says.