TORONTO — Canada’s inflation rate fell to 2.8 per cent in June, down from 3.4 per cent in May, and putting it within the Bank of Canada’s target range for the first time since March 2021.
Here are some of the most notable things about the trends in Statistics Canada’s consumer price index report released Tuesday.
Groceries
While headline inflation continues to tick down, Canadians are still feeling the pinch on their grocery bills, as food inflation showed no improvement last month. Overall, the cost of food rose 8.3 per cent year-over-year in June — the same rate of increase Canada saw in May.
Canadians are likely noticing that most at the grocery store checkout. Statistics Canada reported that grocery prices remained one of the largest contributors to the Consumer Price Index for June, with a 9.1 per cent year-over-year increase, nearly unchanged from the nine per cent increase in May.
On a yearly basis, price increases were recorded for meat (6.9 per cent), dairy products (7.4 per cent) and bakery products (12.9 per cent). Fresh fruit prices grew at a faster pace in June (10.4 per cent) than in May (5.7 per cent), driven in part by a 30 per cent month-over-month increase in the price of grapes.
Food purchased from restaurants rose by 6.6 per cent, slightly lower than the 6.8 per cent year-over-year hike in May.
Transportation
The major driver of downward inflation in June was the price of gasoline, which fell 21.6 per cent, following an 18.3 per cent decline the previous month, while fuel oil and other fuels saw a 31.5 per cent drop in June.
The sharp decrease at the pump was a product of how highly elevated prices were in June 2022. At the time, there was higher global demand for crude oil as China, the largest importer of crude oil, eased some COVID-19 public health restrictions.
Passenger vehicle prices also rose at a slower pace in June, at 2.4 per cent, compared with 3.2 per cent in May. Like with oil, the slowdown is the result of a base-year effect, as improved supply chains and inventories compared with a year ago have slowed price growth.
AutoTrader's latest price index report released earlier this week showed inventory levels are still below pre-pandemic levels, but both new and used inventory has been increasing in recent months.
Since the end of March, both new and used vehicle inventory grew by around five per cent, according to the study, which is based on average Canadian automotive pricing data from listings on AutoTrader.ca. As of June, new SUV inventory is up 49.4 per cent year-over-year, followed by cars (41.4 per cent), trucks (31.5 per cent) and minivans (19 per cent).
Shelter
The cost of shelter rose 4.8 per cent from June 2022, a slight uptick from the 4.7 per cent year-over-year increase in May.
Mortgage interest costs drove the increase, rising by 30.1 per cent since last year as the Bank of Canada continues to hike interest rates. In June, it raised its policy rate by 25 basis points to 4.75 per cent, which it followed up this month by hiking the rate to five per cent.
Rent also rose 5.8 per cent in June. A report this month from Rentals.ca and Urbanation said the average asking price for a rental unit in Canada reached a record $2,042 in June, citing continued interest rate hikes and population expansion as key factors.
The data, which analyzed monthly listings from the Rentals.ca network, showed year-over-year rent inflation for June was 7.5 per cent.
Telecommunications
Another source of relief for Canadians last month was their phone and internet bills, as consumers paid 14.7 per cent less for cellular services in June compared with the same month last year, following an 8.2 per cent decline in May. Overall, the cost of telephone services dropped 11.1 per cent in June from a year ago.
Statistics Canada attributed more affordable phone bills to both lower prices for cellular data plans and promotional pricing.
Meanwhile, prices for internet access services fell 3.2 per cent in June on a year-over-year basis after increasing one per cent in May. On a month-over-month basis, prices declined five per cent, marking the largest one-month decrease since February 2019. That was mostly due to promotions in Ontario and lower prices in Quebec, said the federal agency.
The Canadian Telecommunications Association said in a statement that the recent price reductions "are the latest in a multi-year trend of declining prices in Canada’s wireless market," pointing to a 33.3 per cent drop in cellular service costs over the past three years, according to StatCan data.
The industry saw a major shift in April when Rogers Communications Inc. closed its acquisition of Shaw Communications Inc. That prompted Shaw's sale of Freedom Mobile to Quebecor Inc.’s Videotron in an attempt to ease competition concerns as a requirement for the merger.
Freedom Mobile announced in May it would offer a $50 monthly plan that includes unlimited calls and texts as well as 40 gigabytes of data. As part of conditions laid out by Industry Minister François-Philippe Champagne in March, Videotron must offer plans that are at least 20 per cent lower than those of its competitors.
Child care
Child care and housekeeping services were also highlighted by StatCan as main downward contributors of inflation for June, were down 10.4 per cent compared with a year ago.
That may reflect the federal government's agreements with each province and territory to lower the average cost of child care to $10 per day by 2026, which it said has seen significant progress since last year.
As part of the plan, Ottawa is aiming to create approximately 250,000 new child care spaces across the country, primarily among not-for-profit, public and family-based child care providers. It said that as of last month, more than 50,000 such spaces have been announced across Canada.
The government has already reached its goal of delivering $10-a-day child care in almost half of all provinces and territories, three years ahead of schedule, Prime Minister Justin Trudeau said in a June statement.
The remaining provinces and territories have each achieved at least a 50 per cent reduction in average fees for regulated early learning and child care since announcing deals with Ottawa throughout 2021 and early 2022.
This report by The Canadian Press was first published July 18, 2023.
Companies in this story: (TSX:QBR.B, TSX:RCI.B)
Sammy Hudes, The Canadian Press
