Lower fuel prices lower August inflation rate

In a report from Statistics Canada, it was revealed that the country’s consumer price index had edged higher by 0.1% in August from July, but the year over year inflation rate fell to 1.1%, from the 1.3% it posted in the previous month.

Statistics Canada reported Friday that the consumer price index increased at an annual pace of 1.1 per cent, down from 1.3 per cent in July.

The figures were below the consensus estimate among economist of overall CPI inflation of 1.4 per cent, and a core reading of 2.0 per cent.

Paul Ferley, assistant chief economist at Royal Bank of Canada, said the stimulus already announced was significant and “should be able to provide the lift that the Canadian economy needs”.

In the September monetary report, the Bank of Canada stated that near-term inflation risks appeared to have tilted to the downside and this set of data will support this assertion even with some of the downward pressure likely to be temporary.

Retail sales for July fell 0.1 percent from the prior month, compared with projections for a 0.1 percent increase. Food prices exerted the main drag, rising 1.1 percent in the 12 months to August compared to a 1.6 percent year-on-year-increase in July.

The July decline was registered the same month that the federal Liberal government distributed cheques to families under its revamped child benefit plan.

The August reading was near the bottom fringe of the central bank’s target range of one to three per cent.

The data overall will dampen expectations surrounding the consumer spending outlook, although the July data has been undermined by a drop in gasoline prices and the underlying outlook is more encouraging. Further weakening the outlook for Canada’s economy, retail sales unexpectedly declined in July.

Separately, Statscan said the value of retail sales fell 0.1 percent from June.

On the positive side, retail sales increased 0.2 per cent in July when gas stations were excluded.

“The volume gain should be enough to keep us on track for decent monthly gain in July GDP, leaving (the third quarter) still tracking three per cent or so growth”, Exarhos said. The 6.9 per cent decline in New Brunswick and the 6.2 per cent drop in Newfoundland and Labrador in July coincided with increases in harmonized sales tax in both regions.