Canadians are forking out more for food, according to Statistics Canada data released July 17, driving a 1.0% increase in overall inflation in the 12 months to June.
The 3.4% increase, year-over-year, in the cost of food was led by a 6.6% jump in the cost of meat.
Lower energy prices continue to keep overall inflation in check.
“Energy prices continue to weigh on headline inflation,” said TD economist Jonathan Bendiner.
“The energy index was down 9.0% on a year-over-year basis, though this negative impact has diminished in recent months along with the recent stabilization in commodity markets through June.”
Increases in the prices of alcoholic beverages and tobacco products (up 3.7%), household operations, furnishing and equipment (up 3.1%) and shelter costs (up 1.0%) also helped offset the drop in energy prices.
Taking energy out of the equation, inflation was up 2.1% in June after a 2.2% increase in May.
Core inflation, which excludes the most volatile components of the consumer price index including fruit, vegetables, mortgage interest and natural gas, was up 2.3% over the year after a 2.2% increase in May.
Nick Exarhos of CIBC Economics said this increase to core was unexpected and came in “a tick stronger than expected.”
“The Bank [of Canada] suggests that between six to nine ticks on core’s year-on-year rate are due to temporary effects of the weaker Canadian dollar and one-off special factors, but there’s reason to believe that the BoC is still overestimating how much slack there currently is in the Canadian economy.”
Bendiner said this data and the BoC’s cut to the overnight rate announced July 15 suggest there will likely be no change to the overnight rate until mid-2017.
“The weak economic performance in 2015 and widening output gap have pushed back our expectations for any future hiking cycle,” he said.
Inflation was up 0.8% year-over-year in British Columbia. Increases were seen in all provinces across the country with the exception of Prince Edward Island, where prices fell 0.1%.
Meanwhile, American inflation data was released on the same day, with the U.S. showing a much-lower 0.1% year-over-year increase in consumer prices.
As of press time, the Canadian dollar had fallen below the 77-cent mark to 76.93 cents U.S.
