Consumer inflation in Canada rose by less than expected in July, according to Statistics Canada, as falling gasoline prices offset price increases elsewhere, including for groceries.
Although this may appear as good news at first glance, underlying price pressures for average consumers means there still may not be much relief for household budgets anytime soon.
“If we did nothing more than judge July’s inflation data by its cover, it’s a book we’d assume is a promising read. But flip through the pages of last month’s volume, and you’ll find the plot takes a disappointing turn,” says personal finance expert Shannon Terrell at NerdWallet Canada.
“July’s headline data owes its unassuming appearance almost entirely to gasoline prices, down over 16 per cent year-over-year thanks to the nixed consumer carbon tax. Strip that away and you’ll find the familiar culprits wreaking havoc on Canadian wallets with food and shelter costs that just won’t quit.”
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What was in Statistics Canada’s report?
The Consumer Price Index (CPI) in July was measured at 1.7 per cent compared to the same month in 2024, which is down from June’s reading of 1.9 per cent.
“This is a positive inflation report on many fronts as price pressures ease for goods and services,” says principal economist Andrew DiCapua at the Canadian Chamber of Commerce.
“Sticky core measures in July may put progress at risk, but if this momentum continues, we could see the Bank of Canada move rates lower in September.”
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Most economists were expecting the July inflation report to match the June result of 1.9 per cent.
The Bank of Canada has a target range for inflation of between one and three per cent, and July’s report marks the fourth straight month that inflation’s growth fell below the central bank’s mid-point target of two per cent.
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Interest rates in Canada have held steady since March, with the Bank of Canada’s benchmark sitting at 2.75 per cent.
The next opportunity for the Bank of Canada to make changes to its key lending rate will come in September, but will depend on economic data, including the findings in Tuesday’s CPI report.
Tariffs and supply disruptions, including from the trade war with the United States and China, remains a threat to price stability, as noted previously by the Bank of Canada.
“Time will tell if tariffs are feeding through consumer prices, but there are some upward (price) trends on food and durable goods products that could tilt the scales as the effects of tariffs are realized,” says DiCapua.
One of the biggest pain points for consumers remains grocery prices, which rose again.
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Food purchased from stores as a category saw prices increase by 3.4 per cent in July compared to last year, which was double the headline reading of 1.7 per cent.
July’s report was also the twelfth straight month that food inflation has now been matching or outpacing overall headline inflation.
“For those doing a double-take at the grocery store checkout, wondering whether food has really gotten this expensive—it’s not your imagination. Canadians are paying over 27 per cent more for a cart of groceries than they were just five years ago,” says Terrell.
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Metro Inc., the grocery giant behind Metro and Food Basics recently reported quarterly earnings to investors, which the CEO described as “solid results,” and noted that 20 per cent of its suppliers were raising prices due mainly to tariffs.
“I think these inflation numbers are a reflection of price increases at the retail level. So it’s going to be impossible for them (grocers) to buffer us completely from these (price increases),” says food economist Mike von Massow at the University of Guelph.
“Look at what the grocers are offering, and they are working hard to find alternate sources so that we have some choice. While the overall price index is going up, there will still be some products that haven’t gone up as much.“
Von Massow also says that these price increases for food are due to a combination of overall economic factors in addition to environmental issues such as droughts that have impacted farmers and producers both domestic and abroad, as well as tariffs and counter-tariff measures.
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Although the headline number of 1.7 per cent likely comes as good news to many, most economists and governing members at the Bank of Canada are reading between the lines at some of the underlying trends.
One of the other factors keeping that overall inflation number lower than it might feel was transportation, where price increases were lower than those in any other category.
This also means that because gasoline and vehicle purchases make up such a large portion of what consumers spend, other category trends are being overshadowed by the top line number.
For consumers looking to keep their costs down where possible at the grocery store, it may mean taking the extra time and effort to seek alternatives wherever possible.
“Clearly the affordability crisis in food continues. That’s the bad news. The good news is if you pay a little bit of attention, if you invest the time, you can buffer yourself significantly to some of those price increases,” says von Massow.
“Pay attention to where it’s from, pay attention to what’s seasonal, pay attention what’s made in Canada, finding those things that are on special, and being flexible to try things I think is a great way to at least minimize the degree to which you’re impacted by these price increases.”
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