Canada’s inflation rate eased to seven percent in August, Statistics Canada said Tuesday.
Economists had expected the rate to reach 7.3 percent, after inflation rose to a 40-year high of 8.1 percent earlier this summer.
Instead, the rate fell even more than expected, largely because gasoline became much cheaper during the month.
Gas prices fell 9.6 percent in August from the previous month. This is the largest one-month drop in gasoline prices since April 2020, when the pandemic was just beginning.
Even as gasoline got a little cheaper, food prices continued to rise: The cost of groceries has risen 10.8 percent in the past year.
This is the fastest increase in the typical grocery bill since 1981.
“Food supplies continued to be impacted by multiple factors, including extreme weather, higher input costs, Russia’s invasion of Ukraine and supply chain disruptions,” the data agency said .
Bakery products are up more than 15 percent last year, while fruit is up more than 13 percent.
While grocery bills show no sign of abating, other price increases are starting to slow, with housing costs rising 6.6 percent last year.
In monthly terms, the inflation rate fell by 0.3%. That’s the biggest monthly cooling since 2020. And so-called core inflation, which strips out volatile items like food and energy, fell to 5.2%, down from 5.4% the previous month.
“The easing in core inflation provides a strong signal that the Bank of Canada’s rate hikes are having an impact,” said Tu Nguyen, economist at consultancy RSM Canada.
But even at seven percent, the official inflation rate is still more than twice what the central bank likes to see. Which means consumers and borrowers should expect even more rate hikes.
“Grocery prices are still rising rapidly and rapid wage growth means inflationary pressures remain [so] it is not yet time to breathe a full sigh of relief,” Nguyen said.