Fueled by lower travel, car and electricity prices, inflation continued to fall in Canada last July, reaching 2.5% compared to the previous year. And Quebecers are in for a pleasant surprise at the grocery store, where food prices only increased by 0.6%.
Inflation at 2.5% in Canada is the lowest increase observed, on an annual basis, since March 2021, Statistics Canada noted on Tuesday. In two provinces, Manitoba and Saskatchewan, the rate even fell below 2%, with respective rates of 1.8% and 1.6%. Quebec is slightly below the Canadian average at 2.3%.
“The good news on inflation continues to pile up,” writes Randall Bartlett, Senior Director, Canadian Economics at Desjardins. “With inflation slowing again in July and gradually moving closer to the 2% target for the [Banque du Canada]it seems that achieving the objective of restoring low and stable price growth is within sight.”
“This is good news for the Bank of Canada,” says Claire Fay, an economist at the Royal Bank of Canada (RBC). “The barrier to further cuts by the Bank of Canada this year is low and we continue to expect another 25 basis points of reduction at its next meeting in September.”
In the grocery cart
Food inflation was slightly above average in Canada, at 2.7% on an annual basis. Good news for Quebec consumers: inflation was even lower in Quebec, at 1.4%. In grocery stores, for the “food purchased in stores” category, the price increase was 0.6%, compared to 3.1% for food purchased in restaurants.
Still in Quebec, it was “edible fats and oils” that suffered the highest inflation, at 10.2%. At the other end of the spectrum, “sugars and confectionery” saw prices drop by 7.9%.
Roller coaster rides
Overall, it was tour prices that contributed the most to the slowdown, Statistics Canada said, falling 2.8% in July on an annual basis. However, this is a “year-on-year effect,” the federal agency warns: last year, in July 2023, prices had increased 15.5% compared to the previous month.
It was the first summer without restrictions linked to the pandemic, it should be remembered.
Similarly, travel prices had increased by 7.4% in June 2024 compared to the previous year.
Respite for motorists
After the surge since 2022, motor vehicle prices fell by 1.4% last July on an annual basis. It was mainly used vehicles, with a drop of 5.7%, that generated this decline. New vehicle prices, for their part, saw the increase slow down and settle at 1%. These results are explained by the improvement in inventories compared to July 2023.
This good news is, however, undermined by a 9.6% increase in motor vehicle insurance premiums.
Bulk drops
Electricity prices also fell slightly across the country in July, down 0.8% on an annual basis. Alberta led the way, with a 35.5% decline. This is again a year-over-year effect, with prices rising sharply in that province, by 28.1%, between June and July 2023 “in the context of strong summer demand.”
In percentage terms, on an annual basis, it was “computer equipment and digital devices” that fell the most, at 9.4%. Telephony services also saw prices fall by 6.9%.
Expensive housing
In relatively good news for Canadians, housing inflation slowed to 5.7% in July on an annual basis, compared to 6.2% in July 2023.
Mortgage holders, however, continue to be hit hard, with mortgage interest costs rising 21% compared to the previous year. Renters are also affected, but less severely, with an increase of 8.5%.