Inflation holds at 3% as gasoline and food trends diverge
Canada's annual inflation growth rate held at 3% in August, same as last month, as crude prices continued to stay firm affecting gasoline costs and food prices cooled only moderately, data showed on Monday.
The next month's consumer price index data could show further strengthening as benchmark Brent crude price crossed $100 per barrel this month and U.S. President Donald Trump's new 50% tariffs and Canada's retaliatory measures impact costs for the full month.
Analysts polled by Reuters had forecast the annual inflation rate at 3% and monthly inflation to register no change.
On a month-on-month basis, consumer prices fell 0.1%, Statistics Canada said.
Gasoline prices eased slightly in August but still increased at an annual rate of 22.8%. This was down from 25.7% increase noted in July.
Food prices, which have been accelerating faster than the headline inflation since July, eased slightly and registered an annual growth rate of 2.8%. This was the first time in 14 months that food prices fell below the 3% mark.
Prices for dairy products led the deceleration in food prices with costs rising 0.7% annually in August compared with a 3.1% rise in July. Cheese and yogurt were the top contributors to the slowdown in dairy prices, StatsCan said.
Prices for tours and travel rose 26.1%, another main contributor to the upside inflation after gasoline and food, due to base year effect. During the same period last year costs in this category had fallen due to a sharp decline in Canadian's traveling to the United States.
Core measures remain near 2% as Bank of Canada watches inflation
CPI-median, the centermost component of the CPI basket, stood at 2%, while CPI-trim, which excludes the most extreme price changes, was at 1.9% in August, the same as reported in July. These core measures have largely hovered around 2% for the last several months, easing worries that crude prices were spilling onto other costs.
Shelter costs, which include rents and mortgage interest costs, increased slightly to 1.5% in August from 1.3% in July.
The Bank of Canada said last month that it will not hesitate to increase rates multiple times if inflation stays higher and impacts the closely-watched core measures.
The central bank strives to keep inflation around the mid-point of its target range of 1% to 3%.
The Canadian dollar CAD= extended losses after the inflation data and was trading down 0.29% to C$1.3909 to the U.S. dollar, or 71.90 U.S. cents. Yields firmed, with the two-year government bonds up 1.4 basis points to 2.703%.
TLT•
