Annual price growth in June was held back by the costs of goods, including women’s clothing and food, and mortgage costs for homeowners fell 8.6% year-over-year for the year. largest annual decline in seven decades of comparable data.
Vegetable prices fell 7.5% year-over-year, while beef prices fell 11.1% from June 2020, when prices rose sharply amid outbreaks of Covid-19 have forced factories to close and stifled supplies.
The year-over-year decline for beef was the largest since January 1982.
The heat in the Canadian real estate market pushed up the overall figure as homeowners’ replacement costs, which track house prices, rose 12.9% year over year for the fastest pace. fast since 1987.
Benjamin Reitzes, BMO’s Canadian rate director and macro strategist, said the readings should remove some of the concerns about runaway inflation for now.
He added that the country needs to see the economy reopen more broadly before it sees if any of the inflationary pressures that may emerge.
âThere could be pressures there that have yet to be seen, and globally there is still a lot of pressure on the supply chain,â Reitzes said.
âThere is always the possibility that price pressures will remain a problem. For a month, we have a reprieve. So the Bank of Canada can breathe a little easier for a month, but we’ll see what next month brings.
Statistics Canada said part of the June reading was about comparing prices with the lows recorded in the same month last year.
Gasoline prices, for example, were up 32% year-over-year in June from 43.4% in May, as gasoline prices partially recovered in June 2020 after falling at the start of the pandemic.
The agency said that excluding gasoline prices, the annual inflation rate would have been 2.2%.
CIBC senior economist Royce Mendes said the deceleration in June appears to confirm the Bank of Canada’s view that much of the recent pick-up in inflation is a temporary effect.
Statistics Canada said the average of the three measures of core inflation, which are considered to be better indicators of underlying price pressures and closely monitored by the Bank of Canada, was 2.23% in June, in accordance with the May reading.
âWhile still turbulent, core inflation remains subdued and these price changes are likely in line with the Bank of Canada’s expectations and should not lead to changes in monetary policy,â said Anna Feng, Conference Board economist from Canada.
Bank of Canada Governor Tiff Macklem said the central bank plans to closely monitor price developments over the next few months and will use the tools at its disposal to keep inflation under control if temporary problems appear to emerge. a permanent problem.
TD Senior Economist Sri Thanabalasingam said the bank will also need to keep an eye on inflation expectations, which could rise significantly if supply constraints persist and demand is stronger than expected.
Last week, Statistics Canada updated the basket of goods used to calculate the Consumer Price Index to better reflect spending patterns related to the pandemic. The agency said the change did not have a significant effect on the reading of headline inflation for June.
RBC economist Claire Fan said the change could have a slight dip on future price growth readings, adding that inflation is likely to remain high for the rest of the year as the economic recovery takes hold. momentum.