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Canada’s annual inflation rate held firm at three per cent in August, Statistics Canada said Monday, as gasoline prices and food costs eased slightly last month, while prices for tours and travel rose.
Shelter costs, like rents and mortgage payments, also edged higher in August, the agency said.
On a monthly basis, consumer prices fell 0.1 per cent in August. A Reuters poll of economists last month expected annual inflation held at three per cent, according to LSEG Data & Analytics.
Monday’s consumer price index data predates a recent run-up in crude oil prices driven by an intensifying war in the Middle East. According to pump price data from Kalibrate, the average price for regular grade gasoline nationwide has increased about 21 per cent year-over-year as of Friday.
Bank of Montreal economist Benjamin Reitzes said he expects gas prices to fuel hotter inflation in September.
“Unfortunately, gasoline is on pace to rise at least five per cent in September which, if realized, would likely mean an acceleration in headline CPI,” he wrote in a research note on Monday.
However, RBC economist Abbey Xu says there is limited evidence so far that higher energy costs are driving prices higher elsewhere in the economy.
“Price growth remained high for energy-intensive categories such as air travel, but had not spread materially across the broader consumer basket,” she wrote in research published Monday. “The risk of greater pass-through will rise the longer oil prices remain elevated.”
Looking at the August data, Reitzes said a 0.2 per cent monthly dip in food prices, driven by cheaper fresh fruit and vegetables, was a surprise. However, he expects higher fuel costs will put a damper on more affordable groceries.
“With the surge in energy prices, and diesel in particular, food will likely face upward pressure in the coming months,” he wrote.
Both Reitzes and Xu said Monday’s data from Statistics Canada reinforces their expectations for the Bank of Canada to remain on hold in the near future.
“[There’s] nothing here to push the BoC closer to a rate hike, which should tame market speculation around a potential move in October,” Reitzes wrote. “However, oil prices are a real problem here, up nearly five per cent again today.”