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The latest on July inflation numbers

Welcome to The Globe’s live blog for the release of July inflation numbers.

Canada’s annual inflation rate rose to 3.3 per cent in July as the base-year effect on gasoline prices expired, Statistics Canada said Tuesday. Analysts had expected a rise to 3 per cent from 2.8 per cent in June.

Tuesday’s inflation report could convince the Bank of Canada to raise interest rates again on Sept. 6. Before then, the BoC will have more data to consider, including retail sales on Aug. 23 and gross domestic product on Sept. 1.

The August, 2023 inflation report will be released on September 19.

Find updates from our reporters and columnists below.

12:30 p.m

Canadian inflation is 3.3 per cent. Here’s what happens next

Canada’s inflation figures could be under pressure for a while longer.

So far in August, the average price of gasoline is up 4 per cent over July, according to data from Kalibrate Technologies. Soaring housing costs, meanwhile, continue to strain the finances of homeowners and renters.

This bumpy path back to 2-per-cent inflation is not unexpected and has been repeatedly alluded to by the Bank of Canada.

However, Tuesday’s inflation report – with its surprisingly large uptick in consumer price growth – could convince the central bank to raise interest rates again on Sept. 6.

Before then, the BoC will have more data to consider, including retail sales on Aug. 23 and gross domestic product on Sept. 1. To date, consumers have generally shrugged off the rapid tightening in monetary policy and continued to spend, though there are tentative signs that higher borrowing rates are starting to bite.

While Canada’s next Labour Force Survey will be published on Sept. 8, recent reports have shown a softening in the job market. Not only are there fewer job vacancies across the country, but the unemployment rate has risen to 5.5 per cent – still low by historical standards, but up from a record low of 4.9 per cent last summer.

The August, 2023 inflation report will be released on September 19.

– Matt Lundy

11:40 a.m

Will the July inflation report scare mortgage shoppers away from variable rates once again?

July’s higher-than-expected annual inflation rate raises the odds of another interest rate increase by the Bank of Canada in September. It will be interesting to see whether that’s enough to quash the timid rekindling in interest in variable-rate mortgages that emerged over the past few weeks.

Last week, a financial products comparison site, said it had seen inquiries about variable-rate mortgages tick up from a low of 10 per cent in June to 13 per cent. (For comparison, the company said 57 per cent of all mortgage quotes it tracked were for variable rates in July of last year, when the central bank had only started raising rates.)

“Some consumers believe interest rates have peaked and are anticipating rates may drop in 2024 or 2025. If that’s the case, taking a variable rate now, riding out the higher rate for the next year until rates begin to drop could prove cost-effective for some,” said Victor Tran, a mortgage expert at Ratesdotca, via e-mail.

The July inflation report, though, is another curve ball for borrowers trying to time the peak of the current rate-hike cycle.

Erica Alini

10:40 a.m

Grocery inflation slowdown may be short-lived

The slowdown in grocery inflation (an annual increase of 8.5 per cent in July, compared with 9.1 per cent in June) was one of the few good-news stories out of the latest inflation report. But even that isn’t much to cheer up consumers.

Sure, grapes were a lot cheaper, down 40.9 per cent from a month ago, and oranges slightly less expensive (down 1.8 per cent). But the overall increase in grocery prices since the middle of 2021 has been staggering.

“The cost of a typical basket of groceries has risen nearly 20 per cent over the past two years,” noted TD economist Leslie Preston. That’s the biggest jump in more than 40 years.

And even July’s small grocery inflation reprieve may not last long. For example, Russia’s recent withdrawal from a key grain export deal with Ukraine could once again disrupt global food supplies and lead to higher prices.

Erica Alini

10:23 a.m

Market response

Bond prices fell and yields rose after the July inflation report from Statistics Canada. The yield on two-year Government of Canada bonds jumped above 4.8 per cent before retreating slightly. The Canadian dollar pared earlier losses, rising to about 0.743 per U.S. dollar.

Meanwhile, traders upped their bets on another rate hike on Sept. 6, although they still don’t think this is the most likely scenario. Interest rate swap markets, which capture expectations about future monetary policy decisions, are pricing in a roughly 34-per-cent chance of a quarter-point rate increase, up from 23.2 per cent priced in on Monday, according to Bloomberg data.

– Mark Rendell

10:05 a.m.

David Parkinson: What does July inflation mean for the Bank of Canada?

If the Bank of Canada’s policymakers were looking for a set of “we told you so” data, the July inflation report just handed it to them. It contains all the excuse they need to raise interest rates again, too.

The headline inflation rate – 3.3 per cent, a jarring jump from June’s 2.8 per cent – confirms the bank’s narrative that the fast-falling readings of previous months wouldn’t last. The details underline its concerns that nagging inflationary pressures persist across considerable swaths of the economy.

The overall message from the data is that, despite 4.75 percentage points of interest-rate increases over the past year and a half aimed at putting inflation back in its cage, the beast has still not been tamed. At least not to the central bank’s satisfaction – which is to say, sustainably returning the pace of price growth to the bank’s longstanding 2-per-cent target.

Why is it so important to get inflation down to two per cent?

Of course, Bank of Canada Governor Tiff Macklem and his colleagues won’t be at all surprised by the key culprit in the surge from June’s pace – namely, that a large drop in gasoline prices last year has finally dropped out of the year-over-year comparison. They could see that coming.

But many of the details are more worrisome for the bank.

First, the bank’s favoured measures of core inflation – which filter big and distorting gyrations by individual components of the Consumer Price Index, such as the gasoline pivot – showed virtually no improvement in July. The average of the bank’s two best gauges – CPI-median and CPI-trim – remains near 3.7 per cent. Core inflation has barely moved since May. The implication is that the slowdown in underlying price growth has stalled.

The numbers also show no slowing in the pace of services prices – something the central bank has identified as the key segment of the economy where inflation remains a problem. Services inflation was 4.3 per cent in July, up a tick from 4.2 per cent in June. That’s where the bank has specifically said it wants to see cooling, but it’s just not there.

The bank still has a couple of important economic reports to look at before its Sept. 6 rate decision. Fresh retail sales numbers come out next week. The second-quarter gross domestic product report lands Sept. 1.

But those releases would have to show a serious erosion in economic growth and consumer demand to outweigh these problematic inflation numbers. This report contains all the ingredients the bank needs to justify raising its policy rate at least one more time, to 5.25 per cent from the current 5 per cent.

Columnist David Parkinson

9:50 a.m.

Economist reaction to the July inflation report

Douglas Porter, chief economist at Bank of Montreal

“There’s no sense sugarcoating this one – it is not a good report for the Bank of Canada. While the bank had anticipated a backup in headline inflation in their latest forecast, July’s result is already at their call for all of Q3 (3.3 per cent), and the August reading is almost certainly set to be even higher. The modest slowing in core CPI is a thin silver lining for policymakers in an otherwise strong CPI report. We still believe that with the recent upswing in the unemployment rate and clear signs of cooler spending that the BoC would prefer to move to the sidelines in September and give prior hikes time to work, but the inflation figures will make it a tougher call.”

Leslie Preston, senior economist at Toronto-Dominion Bank

“Although headline inflation moving back above to 3 per cent is likely to catch some attention, it is what’s going on under the hood that is more concerning for the Bank of Canada. The BoC’s median and trim inflation measures continued to make progress in July, but at a glacial pace. Underlying inflation remains a long way from the 2-per-cent goal.”

Tiago Figueiredo, macro strategy associate at Desjardins

“Given the Bank of Canada has given itself a long time to reach the 2-per-cent inflation target, this likely won’t be enough to bring central bankers off the sidelines. As time passes, more mortgages will renew at higher rates and any excess savings will be exhausted, which should weaken demand going into the latter half of the year. Today’s report might nudge the balance of risks slightly to the upside as far as the odds of a September rate hike are concerned. However, weaker signs in GDP and jobs data recently will also factor into the analysis. Barring any major surprise in the upcoming activity data, we expect the Bank of Canada to stay sidelined on Sept. 6.”

Tu Nguyen, economist at RSM Canada

“After months of sharp decline, at above the 1-to-3-per-cent target range, July’s inflation figures are a sombre reminder that the road back to 2 per cent will take time and patience. As a small sign of solace, food inflation stands at the lowest since March, 2022, offering some relief to households. Even then, the Bank of Canada will likely hold in September as the drop in inflation has occurred faster than expected. Core inflations are showing signs of cooling, albeit slowly. July’s inflation figures join the chorus of data, which also includes employment and housing data, that will be flip-flopping for the rest of 2023 and sending mixed signals as the economy muddles through a downturn.”

Katherine Judge, senior economist at CIBC Capital Markets

“It wasn’t good news on the inflation front in July for Canadians, as the pace of price increases accelerated to 3.3 per cent year-over-year from 2.8 per cent in the prior month, leaving the pace well above the consensus expectation of 3 per cent. While base effects tied to a large drop in gasoline prices from a year ago falling out of the calculation contributed to the acceleration, prices excluding food and energy rose by a strong 0.3 per cent in seasonally adjusted terms, although that included a jump in shelter prices tied to higher mortgage-interest costs that move mechanically with the overnight rate. The Bank of Canada’s preferred core measures, CPI-trim and CPI-median, at 3.6 per cent and 3.7 per cent year-over-year, respectively, were in line with consensus expectations. Overall, the strength in the underlying core components leaves our forecast for a final 25 basis-point hike from the BoC in September in place.”

9:30 a.m.

Gas, food, rent and more: Highlights from the July report

Gasoline prices

Lower gasoline prices are no longer dragging down Canada’s annual rate of inflation, Statistics Canada said Tuesday. For months, CPI inflation has been headed downward because of favourable year-over-year comparisons of energy prices, which surged after Russia’s invasion of Ukraine. These base-year effects, however, are now falling out of the calculation.

Gas prices were 12.9 per cent lower in July than a year before, after a 21.6-per-cent drop in June. They were up 0.9 per cent on a month-to-month basis in July.

Food and grocery costs

Shoppers still face rising prices at the grocery store, although food inflation is slowing. Grocery prices were up 8.5 per cent in July from a year ago, down from a 9.1-per-cent increase in June.

Food inflation is being dragged lower by fresh fruit prices, which fell 6.5 per cent month-over-month, the largest drop since February, 2008. The price of grapes fell 40.9 per cent compared with June, while the price of oranges dropped 1.8 per cent.

Bakery products cost 9.8 per cent more in July over the previous year, while meat was up 7.7 per cent. Meanwhile, food purchased from restaurants was up 6.1 per cent over the previous year.

Calculator: The foods to choose to squeeze inflation out of your grocery bill

Interest costs

The biggest driver of inflation remains mortgage-interest costs, which have surged as the Bank of Canada raised interest rates over the past year. Mortgage-interest costs were up 30.6 per cent year-over-year, up from 30.1 per cent in June. Excluding this item, CPI inflation would have been 2.3 per cent.


Rent was up 5.5 per cent in July year-over-year, after a 5.8-per-cent increase in June.


Travel prices pushed up inflation on a month-to-month basis. However, the picture was more mixed year-over-year. Traveller accommodation was up 4.2 per cent compared with July, 2022, while airfares fell 12.7 per cent year-over-year.

Goods versus services

Inflation continues to affect services more than goods. Annual inflation for services was 4.2 per cent, compared with 2.3 per cent for goods. Durable goods prices, in particular, were up only 0.5 per cent year-over-year.

Mark Rendell

8:30 a.m.

Canada’s inflation rate ticks up to 3.3 per cent in July

Canada’s annual inflation rate moved back above the Bank of Canada’s target range in July as year-over-year gas price comparisons did less to drag down overall inflation.

The Consumer Price Index increased 3.3 per cent in July from the year earlier, up from 2.8 per cent in June, Statistics Canada said Tuesday.

Bay Street analysts were expecting it to climb to 3 per cent.

Meanwhile, the central bank’s two preferred measures of core inflation – which aim to capture underlying price pressures in the economy – remained fairly steady, with CPI-Trim declining a notch to 3.6 per cent and CPI-Median staying at 3.7 per cent. The combination of higher headline inflation and steady core inflation could put pressure on the bank to raise interest rates again at its next rate decision on Sept. 6.

Mark Rendell

8:00 a.m.

David Parkinson: Will June’s downward momentum continue or ebb?

The first and most obvious thing I’m looking for in Tuesday’s inflation figures for July is further decline – or lack thereof.

June’s overall inflation rate clocked in at 2.8 per cent, its lowest in more than two years, continuing the steep decline it has been on for months. The key question is whether that downward momentum is continuing or beginning to ebb.

The latter is a distinct possibility. The Bank of Canada has cautioned that the declines may soon fizzle, as favourable year-earlier comparisons fade away, while stubborn underlying pressures continue to keep inflation from retreating to the bank’s 2-per-cent target. Those pressures are underpinned by persistently strong employment figures and wage growth and by resilient consumer demand, although all of those factors have shown signs of moderating in recent data.

In the central bank’s mid-July economic projections, it forecast that the inflation rate would remain around 3 per cent through the middle of next year. But a further decline might indicate the bank was too pessimistic – that inflation may be on track to return to 2 per cent sooner than the bank expected.

Regardless of where the headline inflation rate lands for July, a critical part of the Bank of Canada’s assessment will be the trajectory of the bank’s measures of core inflation. These gauges are designed to look past a few dramatic but temporary price swings in a handful of items in the Consumer Price Index (CPI) and home in on the underlying inflationary pressures weighing on the entire economy. The bank’s two favoured core measures averaged 3.8 per cent in June, implying that those pressures remain considerably stronger than the headline inflation rate suggests.

If you want to know whether the bank is going to stop raising interest rates, and eventually start lowering them, the core inflation rate is the place to look.

The bank’s core measures are pretty complicated tools, not the kind of thing you can replicate at home, but there are ways of eyeballing Statistics Canada’s CPI report to get a feel for the core trend. I like to take a look at how many of the eight major components of CPI are up versus down, which provides a quick assessment of whether the direction of the overall inflation rate is broadly based or confined more narrowly to a couple of sectors. Statscan also provides a few “special aggregates” in the report’s tables that eliminate some notoriously volatile segments – most notably, food and energy – to give a better sense of the broader trend.

Among those special aggregates, one key measure right now is that of services inflation. It was 4.2 per cent in June, triple the 1.4-per-cent rate of the goods side of the economy. This is quite clearly where much of the inflationary heat in Canada resides – and where we still need significant declines.

Columnist David Parkinson

7:30 a.m.

Calculate your personal inflation rate

What is your personal rate of inflation? It’s probably different than the rate that gets reported by Statistics Canada every month.

The Consumer Price Index comprises hundreds of goods and services that people buy – everything from eggs and electricity to car rentals and cannabis. But this leads to inflation figures that, while informative, aren’t reflective of your circumstances. You probably don’t buy everything on that long list of goods and services – let alone in the same proportions.

That’s why The Globe and Mail created this personal inflation calculator, distilling CPI data from April, 2023, to a handful of key categories. Punch in your monthly expenses and the tool will calculate the annual change in consumer prices, based on your budget.

– Globe staff

7:00 a.m.

Help minimize inflation in your grocery bill with our calculator

Is your weekly grocery bill looking a lot higher lately? You can probably blame food inflation for the changes you’ve seen at the supermarket.

Canada’s annual rate of inflation fell in June, but the price of food bought in stores was still 9.1 per cent above what it was a year earlier. Food inflation is hitting pantry staples such as bread and pasta due to global disruptions of wheat; meanwhile, seafood has seen the smallest price increases over the past several years, and bananas have a remarkably steady track record.

If you’re looking for more ways to shield your grocery cart from inflation, this calculator will help you spot ways to bring down costs.

– Globe staff

6:00 a.m.

Inflation report to be released today

The fight to bring inflation back down to the Bank of Canada’s target of 2 per cent could experience a setback Tuesday, when Statistics Canada publishes new figures.

After the annual inflation rate ebbed to 2.8 per cent in June – the lowest in more than two years – Bay Street economists expect it will nudge back up, to 3 per cent, in July’s Consumer Price Index report.

Of late, the Canadian economy has been contending with various inflationary pressures, such as rising costs for gasoline and housing. Groceries remain a sore spot for consumers hoping to stretch their dollars.

Furthermore, the inflation numbers are no longer benefiting from favourable base effects. Commodity prices spiked in the immediate aftermath of Russia’s invasion of Ukraine, but those increases are not part of the annual calculation of CPI growth any more.

“Unfortunately, the easy disinflation is behind us, as the base effects become much more challenging” in the second half of 2023, Bank of Montreal economists wrote Friday in a report.

The Bank of Canada has long signalled that bringing inflation back to its 2-per-cent target could be lengthy and non-linear.

The central bank has forecast that inflation will linger around 3 per cent over the next year before returning to 2 per cent by mid-2025 – a timeline that’s about six months longer than previously anticipated.

Economists will be eyeing the results of Tuesday’s report for any sign of how the Bank of Canada may respond at its next interest rate decision, on Sept. 6. This is the last inflation report before then.

The central bank has raised its trendsetting policy rate by a quarter point at each of its last two meetings – in June and July – after a five-month pause. The benchmark rate is now at 5 per cent, the highest since 2001.

While inflation has slowed substantially from a peak of 8.1 per cent in June, 2022, the central bank’s core measures of inflation – which remove extreme price movements – show CPI growth is still running well above 2 per cent.

“With gasoline prices on the rise again in August, headline inflation could accelerate further to roughly 3.5 per cent by the end of the summer,” wrote Andrew Grantham, senior economist at CIBC Capital Markets, in a client note. “Unless core measures of inflation show signs of deceleration beneath this headline acceleration, one more interest rate hike by the Bank of Canada cannot yet be ruled out.”

– Matt Lundy

Follow Matt Lundy on Twitter: @mattlundy33Opens in a new window
Follow Mark Rendell on Twitter: @mark_rendellOpens in a new window
Follow David Parkinson on Twitter: @ParkinsonGlobeOpens in a new window
Follow Erica Alini on Twitter: @ealiniOpens in a new window

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