Canada’s inflation rate eased to seven percent in August, Statistics Canada said Tuesday.
Economists had expected the rate to reach 7.3 percent, after inflation rose to a 40-year high of 8.1 percent earlier this summer.
Instead, the rate fell even more than expected, largely because gasoline became much cheaper during the month.
Gas prices fell 9.6 percent in August from the previous month. This is the largest one-month drop in gasoline prices since April 2020, when the pandemic was just beginning.
Even as gasoline got a little cheaper, food prices continued to rise: The cost of groceries has risen 10.8 percent in the past year.
This is the fastest increase in the typical grocery bill since 1981.
“Food supplies continued to be impacted by multiple factors, including extreme weather, higher input costs, Russia’s invasion of Ukraine and supply chain disruptions,” the data agency said .
Bakery products are up more than 15 percent last year, while fruit is up more than 13 percent.
The drop in the inflation rate will come as a relief to the Bank of Canada, which has been aggressively raising benchmark interest rates in an attempt to cool things down.
But even at 7%, the official inflation rate is still more than twice what the central bank likes to see.
Beneath the fall in headlines, there were more encouraging signs that underlying inflation may be starting to ease. So-called core inflation, which strips out volatile items such as food and energy, fell to 5.2%, down from 5.4% the previous month.
Leslie Preston, an economist at TD Bank, says there are reasons to expect inflation to be behind us.
“A journey of a thousand miles begins with a single step,” he said. “Canadian inflation took a single step in the right direction in August, but it still has a long way to go.”