Canada: Inflation continues to drop
August 19, 2011
In July, consumer prices increased a seasonally adjusted 0.1% over the previous month, contrasting the 0.3% monthly price decline in June. Annual headline inflation dropped from 3.1% in June to 2.7% in July, coming in a notch below market expectations of a 2.8% increase. Consequently, inflation remains within the Central Bank's 2.0% 1% inflation target, after surpassing the upper tolerance band for the last four months. The lower headline inflation figure reflected a slower increase in gasoline prices. Energy prices continued to be the main driver of headline inflation but slowed from a 15.7% year-on-year increase in June to 12.9% in July. Inflation excluding energy costs would have been 1.7% in July, which is below the 1.9% rate tallied in June. Annual core inflation, which excludes oil and fresh food prices, edged up from 1.3% in June to 1.6% in July. The Bank of Canada expects headline inflation to average 2.9% in 2011 and 2.1% in 2012.