Canada’s inflation rate was almost unchanged in August

According to the recent report by Statistics Canada, the annual pace of inflation was almost unchanged last month, as lower gasoline and air travel prices offset growing costs in other segments.

In August, the consumer price index was up by 0.1% from a year ago, following the same increase seen in July.

Meanwhile, economists predicted an average gain of 0.4%.

Gasoline prices fell by 11.1% annually, following July’s 14.9% drop. In case we exclude this category from calculations, the consumer price index will go up by 0.6%.

The air travel costs were down by 16% from a year ago, following a decrease by 8.6% in July as demand was down during the pandemic and airlines had to provide huge discounts.

At the same time, prices rose in other categories, e.g. haircuts showed an annual prices increase by 7.2%.

RBC senior economist Nathan Janzen says consumer demand was better than expected this summer, and it encouraged price growth in certain segments, as well as allowed businesses to pass on additional costs.

“The main question is how long can it last with a high unemployment and the economy running below capacity?”

Canada has recouped almost two-thirds of the three million jobs lost in March and April, and the unemployment rate reached 10.2% last month.

A key factor increasing spending has been government aid, including the CERB, that has paid out more than $76.4 billion to 8.75 million people.

The central bank plans to keep its overnight rate at the lowest level possible (0.25%), until inflation returns to the Bank’s target mark of 2%.

Such low rates could make it easier for people to borrow and spend in order to help the economy as it recovers from the COVID-19 crisis.

Experts expect the BoC to keep its key lending rate unchanged until late 2022 or into 2023.