Canada’s inflation rate fell to 2.8 per cent in June, down from 3.4 per cent in May, and putting it within the Bank of Canada’s target range for the first time since March 2021.

Here are some of the most notable things about the trends in Statistics Canada’s consumer price index report released Tuesday.

Groceries

While headline inflation continues to tick down, Canadians are still feeling the pinch on their grocery bills, as food inflation showed no improvement last month. Overall, the cost of food rose 8.3 per cent year-over-year in June — the same rate of increase Canada saw in May.

Canadians are likely noticing that most at the grocery store checkout. Statistics Canada reported that grocery prices remained one of the largest contributors to the Consumer Price Index for June, with a 9.1 per cent year-over-year increase, nearly unchanged from the nine per cent increase in May.

On a yearly basis, price increases were recorded for meat (6.9 per cent), dairy products (7.4 per cent) and bakery products (12.9 per cent). Fresh fruit prices grew at a faster pace in June (10.4 per cent) than in May (5.7 per cent), driven in part by a 30 per cent month-over-month increase in the price of grapes.

Food purchased from restaurants rose by 6.6 per cent, slightly lower than the 6.8 per cent year-over-year hike in May.

Transportation

The major driver of downward inflation in June was the price of gasoline, which fell 21.6 per cent, following an 18.3 per cent decline the previous month, while fuel oil and other fuels saw a 31.5 per cent drop in June.

The sharp decrease at the pump was a product of how highly elevated prices were in June 2022. At the time, there was higher global demand for crude oil as China, the largest importer of crude oil, eased some COVID-19 public health restrictions.

Passenger vehicle prices also rose at a slower pace in June, at 2.4 per cent, compared with 3.2 per cent in May. Like with oil, the slowdown is the result of a base-year effect, as improved supply chains and inventories compared with a year ago have slowed price growth.

AutoTrader’s latest price index report released earlier this week showed inventory levels are still below pre-pandemic levels, but both new and used inventory has been increasing in recent months.

Since the end of March, both new and used vehicle inventory grew by around five per cent, according to the study, which is based on average Canadian automotive pricing data from listings on AutoTrader.ca. As of June, new SUV inventory is up 49.4 per cent year-over-year, followed by cars (41.4 per cent), trucks (31.5 per cent) and minivans (19 per cent).

Shelter

The cost of shelter rose 4.8 per cent from June 2022, a slight uptick from the 4.7 per cent year-over-year increase in May.

Mortgage interest costs drove the increase, rising by 30.1 per cent since last year as the Bank of Canada continues to hike interest rates. In June, it raised its policy rate by 25 basis points to 4.75 per cent, which it followed up this month by hiking the rate to five per cent.

Rent also rose 5.8 per cent in June. A report this month from Rentals.ca and Urbanation said the average asking price for a rental unit in Canada reached a record $2,042 in June, citing continued interest rate hikes and population expansion as key factors.

The data, which analyzed monthly listings from the Rentals.ca network, showed year-over-year rent inflation for June was 7.5 per cent.

Source: The Star