In June, Canada's annual inflation rate climbed to 8.1 per cent, the sharpest yearly rise in prices since January 1983, as Statistics Canada reported. The jump was driven most visibly by gasoline, which cost more than half again as much as it had a year earlier, while energy and food also rose as the economy reopened. Coming just after the Bank of Canada lifted its key rate by a full point to 2.5 per cent, the figure reflects a long-running squeeze on household budgets, and a growing fear that expectations of high prices may themselves keep prices high.
Canada's Inflation Climbs to 8.1% in June, Highest Since January 1983
An inflation rate at its highest since 1983
Mark
So what is the headline here? Inflation at 8.1 per cent in June?
Mimi
Yes, up from 7.7 per cent in May, and it's the largest yearly change since January 1983. Gasoline is the main reason, up more than 50 per cent from a year ago.
Mark
Why does gas drive the number so much?
Mimi
Statistics Canada said the June acceleration was largely because gas prices rose even faster than before. Energy and food were also climbing as the economy reopened.
Luke
Careful, though. The report says gas was the largest factor, not the only one. We don't have a breakdown of how much each category contributed.
Mark
Fair. Was this a surprise to anyone?
Mimi
Not really. The article says it matched what economists expected.
Luke
Right, and that's worth keeping. It's a confirmation of a trend, not a shock.
Mark
And the Bank of Canada?
Mimi
It raised its key rate by a full percentage point to 2.5 per cent, citing fears about rising inflation expectations among consumers and businesses.
Luke
Notice what's unknown: whether that hike will bring inflation down. The article doesn't say, and one month of data can't answer it.
Il Polso
- Inflation has surged to 8.1 per cent, its highest level in nearly four decades, up from 7.7 per cent in May.
- Gasoline prices, up more than 50 per cent from a year ago, are hitting drivers and haulers hardest.
- Energy and food costs are climbing alongside a reopening economy, so demand and prices are pushing the same way.
- The Bank of Canada responded with a full-point rate hike to 2.5 per cent, but worry is mounting that consumers and businesses now expect inflation to stay high.
- Whether the rate increases can cool price growth remains an open question, to be answered by coming monthly data and the next rate decision.
In June, Canada's annual inflation rate climbed to 8.1 per cent, the sharpest yearly rise in prices since January 1983, as Statistics Canada reported. The jump was driven most visibly by gasoline, which cost more than half again as much as it had a year earlier, while energy and food also rose as the economy reopened. Coming just after the Bank of Canada lifted its key rate by a full point to 2.5 per cent, the figure reflects a long-running squeeze on household budgets, and a growing fear that expectations of high prices may themselves keep prices high.
Canada's annual inflation rate reached 8.1 per cent in June, according to Statistics Canada, the biggest year-over-year jump in prices the country has recorded since January 1983. The figure rose from 7.7 per cent in May. The change is only four-tenths of a percentage point, but it lifts the measure to a level not seen in nearly forty years.
Gasoline was the main force behind the acceleration. Pump prices climbed faster than in the previous month and now stand more than 50 per cent above a year earlier. For commuters and anyone who moves goods for a living, it is the most immediate figure in the report. Energy and food prices also kept rising as the economy reopened, so demand and costs moved in the same direction. The result matched what economists had anticipated, confirming a trend more than surprising the market.
The release follows a full-point increase in the Bank of Canada's key rate, to 2.5 per cent. The central bank has voiced concern that consumers and businesses are beginning to expect high inflation, which can make price increases difficult to reverse. Upcoming monthly readings and the next rate decision will show whether these measures are beginning to slow price growth.
Canada's annual inflation rate reached 8.1 per cent in June, according to Statistics Canada. That is the biggest year-over-year jump in prices the country has recorded since January 1983.
The June figure edges up from May, when the annual rate stood at 7.7 per cent. The change between the two months is four-tenths of a percentage point, but it pushed the measure to a level not seen in nearly four decades.
Statistics Canada attributed the speed-up in June largely to gasoline. Pump prices rose even faster than they had the month before, and compared with a year earlier they were up by more than 50 per cent. For anyone who drives to work or hauls goods for a living, that is the single most visible number in the report.
Gas was not acting alone. Energy and food prices continued to climb, and the economy was reopening further, a combination that kept demand and costs moving in the same direction. The result was consistent with what economists had expected going into the release, so the figure confirmed a trend more than it delivered a surprise.
The report arrives after the Bank of Canada's most recent rate decision, in which it raised its key interest rate by a full percentage point to 2.5 per cent. The central bank has pointed to growing worry that consumers and businesses are coming to expect high inflation, which can make price increases harder to dislodge once they take hold.
The pieces now sit side by side: an inflation rate at its highest since 1983, a policy rate that has just been lifted by a full point, and gasoline prices more than half again what they were a year ago. The next monthly inflation readings, and the Bank of Canada's next rate decision, will show whether those increases are starting to slow price growth.
Citazioni salienti
Price acceleration in June was largely the result of gas prices rising even faster.— Statistics Canada (paraphrased)
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Economy & Finance