23 September 2008

Inflation at 5-year high

The following was reported on in the 23 September 2008 edition of “Toronto Star”.

The rate of increase in the cost of living hit the highest level in more than five years last month, increasing to 3.5 per cent on an annual basis from 3.4 per cent in July, Statistics Canada said Tuesday.

But the pace of price increases that concerned the Bank of Canada a few months ago appears to be slowing.

As has been the case for several months, gasoline and other energy costs were the key drivers of annualized inflation.

But after significant jumps in the previous two months, the all-items consumer price index – excluding seasonal adjustments – declined 0.2 per cent during August on a month-to-month basis.

And the core price index, which excludes volatile prices such as energy and fresh produce, was up 1.7 per cent from a year ago, an increase from July's 1.5 per cent but still below the Bank of Canada's two per cent target.

After seasonal adjustment, consumer prices rose 0.2 per cent in August from July.

It cost 26.3 per cent more to fill up at the gas station in August than a year earlier, but gasoline prices were 6.6 per cent less last month than in July, when the price of crude oil hit record levels.

Overall, energy prices have risen 20.2 per cent over the past 12 months, accounting for about half of the overall inflation run-up.

Excluding energy, the annual inflation rate would have stood at 1.8 per cent in August.

But Statistics Canada noted that food prices have also become a major component of price increases, rising 4.5 per cent in August.

Prices for baked goods and cereal in particular jumped 14.9 per cent, the largest increase since 1981, and fresh vegetables rose 9.2 per cent.

Also registering significant gains in August were transportation and mortgage costs.

Helping to offset the all-items index was the cost of purchasing or leasing motor vehicles (down 7.3 per cent), computer equipment and supplies (down 11.6 per cent), and clothing and footwear (off 1.8 per cent).