Canada’s Inflation rate hits 3.1% as shelter and transport costs rise

Canada’s inflation rate came in at 3.1 per cent in June as prices for shelter and transportation rose quickly, while increases in things like food, clothing and recreation slowed down from May’s level.

Statistics Canada reported Wednesday that shelter costs have increased by 4.4 per cent in the past year, and transportation costs went up by 5.6 per cent compared to June of 2020.

But the inflation rate was dragged lower because the price of many goods has come down from where it was last year, including beef, which has declined by 11 per cent, fresh vegetables (down by 7.5 per cent) and cellular services (down an eye-popping 21 per cent).

The decrease for the latter “was mainly due to a variety of promotions across the industry offering lower prices for cellular phone plans and bonus data,” the data agency said.

Shelter costs were a major factor pushing the rate up, as the cost of buying or renting a home continues to increase.

Replacement cost, which is a proxy for house prices, went up by 12.9 per cent. That’s the second-fastest pace in 30 years, noted Bank of Montreal economist Benjamin Reitzes in a report, and the fastest since 1987.

‘Another spurt of price pressures’ possible

While the cost of a place to live increased, the cost of financing it has plummeted. Mortgage interest costs have fallen by 8.7 per cent in the past year, which is the biggest plunge in more than 70 years of data keeping, Reitzes noted.

The price of gasoline, meanwhile, has increased by 32 per cent in the past 12 months. But that’s actually down from 43 per cent a month earlier. Nonetheless, pump prices played a huge role in the rate.

If gasoline is stripped out of the numbers, the inflation rate was just 2.2 per cent.

The overall inflation rate of 3.1 per cent was about what economists were expecting.

“As the re-opening progresses, assuming [the delta variant] doesn’t throw us in reverse, we could see another spurt of price pressures,” Reitzes said.