The inflation report came as Statistics Canada also reported retail sales for June increased 0.6 per cent to $43.2 billion, topping expectations for a gain of 0.2 per cent, according to Thomson Reuters.
“However, [the effect of lower energy prices overall] has moderated through the past three months, as the effects of past price movements work their way through the index”.
The annual rate of inflation in July, as measured by the Retail Price Index, stood at 1.07%, up from -0.05% that was registered in July 2014.
The Bank of Canada’s core index, which excludes some of the most volatile items, was up 2.4 per cent from a year ago – in line with estimates. The bank estimates the underlying inflation trend at about 1.5 percent to 1.7 percent.
Sales in the personal and household goods subsector rose 2.2 per cent to a record $7.8 billion, following two consecutive declines.
Although passenger vehicles cost more, overall transportation costs fell, driven by lower gasoline prices.
OTTAWA-Canadian retail sales rose more than expected in June on higher sales of gasoline and cellphones, but volumes were flat, indicating the increase was entirely due to higher prices. Prince Edward Island saw prices drop to post its eighth consecutive year-over-year decrease.
Paul Ferley, assistant chief economist for RBC Economics, said the Bank of Canada will likely be cautious about further stimulating the economy.
What has changed is the oil price drop fueling concerns over the ability of the Canadian economy to rebound in the second half of this year, as projected by the Bank of Canada. Economists surveyed by Bloomberg News forecast a 0.2 per cent increase, based on the median of 20 projections.