Canadian inflation declines to 2.7 per cent in July

Introduction of HST and price of food contribute to rate

Consumer costs in Canada eased to 2.7 per cent in July, down from 3.1 per cent in June and a 3.7 per cent advance in May, according to Statistics Canada.

As expected, the anniversary of the introduction of the Harmonized Sales Tax (HST) in Ontario and British Columbia on July 1, 2010 contributed to the lower rate. Nova Scotia also increased its HST by two percentage points at this time.

Prices for food purchased from stores rose 5.1 per cent in the 12 months to July, building on last month’s growth of 4.8 per cent.

The cost of transportation was up 6.5 per cent compared to 12 months before, due to a combination of increased gas, car insurance and air transportation prices.

Canadians were paying 23.5 per cent more for gasoline than they were this time last year. This is down slightly when compared to the 28.5 per cent increase in June. Energy prices as a whole went up 12.9 per cent when compared to 12 months ago.

Among major components, shelter costs rose 1.3 per cent.

The Bank of Canada’s core index — or inflation minus the most volatile elements, including energy, some fruits and vegetables, mortgage interest, and tobacco — increased 1.6 per cent in the 12 months to July, following a 1.3 per cent decline in June.

Analysts noted that Canadian inflation has been more volatile of late, but core inflation has remained below the central bank's two per cent target.

The largest increase in consumer prices was observed in New Brunswick. The province saw a 3.8 per cent increase, down slightly from last month’s 3.1 per cent increase.

The smallest increase was experienced in British Columbia with prices averaging only 1.7 per cent higher than a year ago. Last month, the province saw a 2.7 per cent gain.

In the United States, the rate of inflation rose by 0.5 per cent in July, the U.S. Labour Department reported. The overall annual inflation rate remained steady at a year-over-year rate of 3.6 per cent, for the third month in a row. Energy and food prices were the principal source of the increase.

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