Canada’s inflation rate eased to 2.0% in August 2024, marking the slowest annual increase since February 2021, according to data released by Statistics Canada. The decline follows a 2.5% year-over-year increase in July and reflects lower gasoline prices as a key factor in the slowdown.
Excluding gasoline, inflation rose 2.2% in August, down from 2.5% in the previous month. The agency cited a combination of lower prices at the pump and a base-year effect—where a sharp price increase from a year earlier influences current data—as primary reasons for the deceleration.
“The fall in gasoline prices, down 5.1% year-over-year, had the most significant impact on the overall Consumer Price Index (CPI),” the agency said, highlighting that August marked the third monthly decline in fuel prices over the past four months.
Despite easing inflation, housing-related costs continued to drive the CPI. Mortgage interest costs surged 18.8% from a year earlier, maintaining their status as the largest contributor to inflation since late 2022. However, the rate of increase in mortgage interest costs has been gradually slowing after peaking at 30.9% in August 2023.
On a month-over-month basis, the CPI dipped 0.2% in August after a 0.4% increase in July, led by lower costs for air transportation, gasoline, clothing, footwear, and travel tours. Seasonally adjusted, the CPI increased by 0.1% from July to August.
Groceries rise while clothing prices drop
Grocery prices rose by 2.4% year-over-year in August, up from a 2.1% gain in July, primarily driven by higher prices for dairy products and fresh fruit. However, on a month-over-month basis, food costs declined slightly by 0.2%, with fresh vegetable prices dropping 2.8% due to typical seasonal patterns.
In contrast, clothing and footwear prices fell 4.4% in August compared to the previous year, marking the eighth consecutive month of declines. The month saw a 0.6% decrease in prices for apparel, a notable departure from the usual upward trend associated with back-to-school shopping. Retailers offered deeper discounts amid slowing consumer demand.
Regional trends and electricity prices
Inflation slowed in all provinces compared to July, with regional variations reflecting different market dynamics. Electricity prices, for instance, declined 1.7% year-over-year nationwide, a sharper drop than July’s 0.8% decrease. This decline was largely attributed to high base-year costs in Alberta, where demand surged in the summer of 2023.
However, on a monthly basis, electricity rates rose in August. Alberta experienced a 3.5% hike due to increased regulated rates, while Newfoundland and Labrador saw a 6.6% increase following approved rate hikes.
The overall slowing of inflation in August offers some relief to Canadian consumers, particularly as energy prices continue to fluctuate and housing costs remain high. The impact of inflation will continue to be closely watched, especially as key drivers such as mortgage costs and food prices show mixed trends.