Higher gas and home prices pushed up Canada's consumer price index (CPI) for July, the fourth month above the central bank’s target inflation range. The CPI rose 3.7% year over year in July, the largest jump in since 2011, and above consensus estimates of 3.4%. On a month-over-month basis, prices climbed 0.6% in July, and on a seasonally adjusted basis, CPI rose 0.5% from the previous month.
The country’s red-hot housing market drove the majority of the growth—homeowner replacement cost rose 13.8%, which is the fastest pace since 1987. Food prices rose by 1.7% compared with a year earlier, however food purchased at restaurants grew 3.1%, the highest rate since January 2019.
The Bank of Canada’s preferred inflation measure, the average of core inflation readings, is considered a better gauge of underlying price pressures; this also rose to its highest level in over a decade. Core inflation is meant to gauge price changes in items that exclude volatile goods like food and energy, and July’s measure came in at 2.47%.
Canada’s central bank interest-rate policy aims to achieve and maintain 2% inflation, or the mid-point between a 1% and 3% target range. While this is the fourth month the inflation rate is above the Bank of Canada’s target rate, Governor Tiff Macklem called the spike transitory.
Across the globe, inflation rates have increased due to supply chain bottlenecks and higher energy prices. However, the print may not bode well for Prime Minister Justin Trudeau who is trying to win back his parliamentary majority in a snap election next month. Trudeau is accused by main opposition Conservatives of fueling inflation—and higher costs—with debt-financed spending plans to combat the pandemic.
