Canadian prices, as measured by the Consumer Price Index (CPI), rose 2.7 per cent on a year-over-year basis in June, down from a 2.9 per cent increase in May. Month-over-month, on a seasonally adjusted basis, CPI rose by 0.1 per cent in June. The deceleration in headline CPI was largely driven by declining gasoline prices. Excluding gasoline, the CPI rose 2.8 per cent in June. The shelter cost index remains the major driver of inflation with the rate of increases higher now (6.2 per cent) than they were this time last year (4.8 per cent). Mortgage interest costs were up 22.3 per cent and rent was up 8.8 per cent from last June. Excluding shelter, consumer prices rose just 1.3 per cent, year over year. Driven by furniture and used cars, durable goods costs fell 1.8 per cent year-over-year in June as supply chains continue to recover. In BC, consumer prices rose 2.6 per cent year-over-year, down from 2.9 per cent in May. The Bank of Canada's preferred measures of core inflation, which strip out volatile components, fell to between 2.3 and 2.9 per cent per cent year-over-year in June.
Canada's inflation report contained some good news mixed in with familiar challenges. The headline year-over-year price change declined in June, reversing May's uptick, and came close to the lowest rate since early 2021. This was achieved in part due to 3.1 per cent month-over-month decline in gasoline prices following an announcement from the Organization of the Petroleum Exporting Countries (OPEC) that it plans to increase production. On the other hand, the year-over-year change in food costs rose for a second consecutive month, halting an optimistic downward trend. CPI-median and CPI-trim are back above the 2 per cent target when measured on a 3-month annualized basis for the second consecutive month. Finally, shelter costs and especially rents remain the most persistent challenge in the CPI and show few clear signs of improvement. Taken together, however, markets considered the report positive news and raised the probability that the Bank of Canada would cut rates next Wednesday to 90 per cent.
Copyright British Columbia Real Estate Association. Reprinted with permission.
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