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Canada Annual CPI Decelerates to 3.1% in June — Update

By Kim Mackrael

OTTAWA--Canada's annual inflation rate decelerated in June as the effects of last year's economic reopening contributed to smaller year-over-year price increases compared with prior months.

Canada's consumer-price index rose 3.1% on a year-over-year basis in June, Statistics Canada said Wednesday, slower than the 3.6% increase recorded in the previous month. Market expectations were for a 3.2% rise in June, according to economists at TD Securities.

On a month-over-month basis, prices climbed 0.3% in June. On a seasonally adjusted basis, CPI rose 0.1% in June from the previous month.

Excluding gasoline, headline inflation rose by 2.2% on an annual basis in June, the data agency said.

Meanwhile, the average of the Bank of Canada's preferred measures for underlying inflation in June was 2.23%. Core inflation is meant to gauge price changes in items that exclude volatile goods like food and energy.

Several economists said the June deceleration should ease concerns about the possibility of a persistent rise in headline inflation. The Bank of Canada said earlier this month that the factors pushing up inflation are largely temporary, such as a rebound in gasoline prices and supply-chain bottlenecks. Officials at the central bank expect inflation to remain above 3% through the second half of 2021 before easing back toward 2% in 2022.

"While the headline rate is still well above the Bank of Canada's 2% target, the deceleration appears to confirm the central bank's view that much of the recent pickup in inflation was transitory," CIBC Capital Markets economist Royce Mendes said.

The June data used Statistics Canada's recently revised weights in calculating the consumer-price index, reflecting changes in spending patterns during the Covid-19 pandemic by putting more weight on shelter and household furnishings, and less on transportation. The data agency said the headline number for annual inflation wasn't affected by the new weightings.

Statistics Canada said the deceleration in June was largely the result of price increases that took place one year earlier, at a time when the economy was reopening after the initial shutdown that began in March 2020 and was meant to curb the spread of Covid-19. Annual inflation data compare current prices with those from a year earlier.

In June, shelter prices rose 4.4% on a year-over-year basis and transportation prices increased 5.6%. Price growth slowed the most in the clothing and footwear category, advancing just 1.1% year-over-year, mainly because of lower prices for women's clothing. Gasoline prices also advanced at a slower annual pace in June compared with the previous month.

Write to Kim Mackrael at kim.mackrael@wsj.com

 

(END) Dow Jones Newswires

July 28, 2021 10:05 ET (14:05 GMT)

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