August sees slowest inflation in two years
Inflation risks have tilted to the downside since July
Canada’s core inflation rate was the slowest in two years in August, missing even the most bearish forecast, in another blow to the country’s economic outlook.
The 12-month pace of consumer prices excluding eight volatile items slowed to 1.8 per cent, from July’s 2.1 per cent rate, Statistics Canada said Friday from Ottawa. The overall inflation rate decelerated to1.1per cent, from 1.3 per cent. Analysts had predicted overall prices would accelerate on the month instead of slowing.
Inflation risks have tilted to the downside since July, in part because of slack in the broader economy linked to weak exports, Bank of Canada governor Stephen Poloz said earlier this month. Deepening the gloomy economic outlook, Statistics Canada also reported Friday that retail sales fell 0.1 per cent in July, versus a forecast for a 0.1 per cent increase.
“It keeps him wary about the economic outlook, the inflation numbers are moving away from their mid-range target of 2 per cent,” said Paul Ferley, assistant chief economist at the Royal Bank of Canada. “We are in a fairly volatile period in terms of the growth numbers. It leaves the bank on the sidelines.”
Food-price gains slowed to 1.1 per cent in August from 1.6 per cent in July, including a 0.4 per cent gain for food purchased from stores that was the smallest since June 2010. The recreation category slowed to 1.1 per cent from 1.9 per cent.
“Smaller year-over-year gains in the food index and the recreation, education and reading index contributed the most to the deceleration,” Statistics Canada’s report said.
Gasoline prices, one of the main things holding down inflation over the last year, exerted less of a drag in August. Prices at the pump fell 11.5 per cent in August, less than the 14 per cent decline in July.
Lower gasoline prices were also part of the story for the July retail sales figures, as receipts at gas stations fell 3 per cent on the month, Statistics Canada said. Excluding gasoline, sales rose 0.2 per cent.
Still, the overall 0.1 per cent drop came in a month where economists forecast a gain of 0.1 per cent, and means sales have been little changed for three months.
Earlier this month, the Bank of Canada said growth and inflation prospects had weakened in recent months, a step back from a July prediction shipments outside the energy industry were set to dominate a recovery.