Inflation rate rises to 3.1% in August
Canada's annual inflation rate was stronger than expected in August, checking in at 3.1 per cent as consumers paid more for gasoline and groceries.
The August rise followed increases of 2.7 per cent in July and 3.1 per cent in June, Statistics Canada said Wednesday.
Economists had been forecasting a 2.9 per cent year-over-year rate of inflation for August, according to a Reuters survey of 24 forecasts.
The Bank of Canada's closely watched core inflation index rose 1.9 per cent in the 12 months to August, following a 1.6 per cent gain in July. The higher increase in August was mainly due to a rise in prices for passenger vehicle insurance premiums, food purchased from restaurants as well as bakery and cereal products.
The central bank aims to keep overall inflation at the two per cent target, the midpoint of its one to three per cent inflation-control target range. The central bank's governor, Mark Carney, said Tuesday that he was not worried about inflation and that he would not raise interest rates.
"Despite the upside surprise to core inflation, the Bank of Canada appears in no rush to tighten given the economic and financial market headwinds that are currently blowing," BMO Financial Group chief economist Sherry Cooper said in commentary. "But the appetite to ease now looks smaller."
Derek Burleton, deputy chief economist at TD Economics, thinks the August inflation rise will be temporary.
"Since August, near-term economic growth prospects globally and in Canada have soured, and world commodity prices have pulled back," Burleton said. "These developments should begin to show up in the September inflation numbers."
Higher gas, food prices
Statistics Canada said gasoline prices went up 22.8 per cent between August 2010 and August 2011, compared with the 23.5 per cent 12-month increase in July. Prices for fuel oil and electricity also rose, while natural gas prices fell.
Food prices went up 4.4 per cent in the 12 months to August, following a 4.3 per cent annual increase in July. Consumers paid 5.0 per cent more for food purchased from stores and 2.7 per cent for restaurant meals.
On a seasonally adjusted monthly basis, consumer prices rose 0.3 per cent from July to August. Economists had expected a rise of 0.1 per cent.