Canadian households are dealing with a surge in inflation, the fastest in four months, as gasoline and housing costs continue to rise. The consumer-price index (CPI), a key measure of inflation, climbed 4.0% in August from the same period last year, surpassing market expectations of a 3.8% increase, according to data released by Statistics Canada on Tuesday. This follows a rise to 3.3% in July.
The Bank of Canada had predicted this inflation acceleration due to recent increases in energy prices. Similar trends were seen in U.S. inflation as gas prices rose for the first time since January, reversing a sharp drop in July.
On a monthly basis, the CPI rose by 0.4% compared to July, exceeding the consensus expectation of a 0.2% increase. Adjusted for seasonal factors, August's inflation rate saw a 0.6% month-on-month uptick.
Year-over-year comparisons have become more challenging as inflation was steadily declining from a high of 8.1% last summer. The latest inflation report is one of two that the central bank will assess before its policy decision scheduled for late October.
Earlier this month, the bank decided to keep its benchmark interest rate at 5% after consecutive quarter-point hikes in June and July. Despite signs of an economic slowdown, bank officials remain cautious of ongoing underlying inflationary pressures.
Two core inflation measures closely watched by the Bank of Canada, the weighted median and trimmed mean, rose to an average 4.0% from 3.75% in July, according to Statistics Canada. Despite efforts by the bank to bring annual inflation back to its target of 2%, three-month rates of core inflation have remained between 3.5% and 4% for almost a year.
Gas prices in Canada saw a significant monthly increase, driven by higher crude oil costs due to production cuts by major oil-producing nations. This led to the year-over-year rise for August. When gasoline is excluded, the CPI rose 4.1% on-year in August, consistent with the previous month.
Food prices in Canada remain high, although the growth rate slowed to 6.9% annually from 8.5% in July. Consumers paid more for items such as beef and coffee and tea, while prices for fresh fruit, cereal products, and chicken increased at a slower pace.
When volatile food and energy prices are excluded, Canada's CPI rose 3.6% in August compared to the same period last year, following a 3.4% increase in July. Housing costs for the month were primarily driven up by rent increases, along with a slight rise in mortgage interest rates. On the other hand, prices for travel-related services saw a year-on-year decline.
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