Canadian inflation eased to seven per cent in August, Statistics Canada said on Tuesday.
After inflation rose to a 40-year high of 8.1 percent earlier this summer, economists expect the rate to reach 7.3 percent.
Instead, the rate fell more than most expected because gasoline got so cheap this month.
Gas prices fell 9.6 percent in August from a month earlier. This is the biggest one-month drop in gasoline prices since April 2020, when the pandemic began.
Even as gasoline got a little cheaper, food prices continued their rise — with grocery prices rising 10.8 percent over the past year.
This is the fastest increase in the general grocery bill since 1981.
“Food supplies continued to be impacted by multiple factors, including extreme weather, high input costs, Russia’s attack on Ukraine and supply chain disruptions,” the data agency said.
The price of edible fats and oils has risen by nearly 28 per cent in the past year, while prices of coffee and tea have risen by over 13 per cent. Bakery products have grown by more than 13 percent in the last 12 months.
While grocery bills show no signs of getting smaller, other price increases are beginning to slow, with shelter costs rising 6.6 percent over the past year.
On a month-on-month basis, the inflation rate decreased by 0.3 percent. This is the largest monthly cool-down since 2020. And so-called core inflation — which strips out volatile items like food and energy — fell to 5.2 percent from 5.4 percent last month.
“The easing in core inflation provides a strong signal that the Bank of Canada’s rate hikes are having an impact,” said Tu Nguyen, economist with consultancy RSM Canada.
But even at seven percent, the official inflation rate is still twice what the central bank wants to see. That means consumers and borrowers should expect more rate hikes to come.
“Grocery prices are still rising rapidly and rapid wage growth means inflationary pressures remain [so] It’s not yet time to breathe a sigh of relief,” Nguyen said.
Prince Edward Island resident Jennifer Cullen says inflation is out of control for her family. She tries to save money anyway she can, and she says one way she can stretch those pennies is by shopping at vintage and used clothing stores.
“My kids are so active and they grow up so fast, so I’m changing shoes and clothes every couple of months with one of my boys,” she told CBC News while browsing the clothes at Repeats in Charlottetown.
Shop owner Mary Matthews said she’s noticed an uptick in sales of late as families stretch their budgets. Although higher sales are good for her bottom line, her costs are also up, as her inventory costs are double what they were last year.
“It touches all of us,” Matthews said. “Everything costs more.”