The annual rate of inflation in Canada remained stable at three per cent in August, as a deceleration in gasoline prices was balanced by increased expenses in rent and travel, according to recent data from Statistics Canada. The agency noted that while gasoline prices continued to climb, the rate of increase slowed down to 22.8 per cent from 25.7 per cent reported in July, largely influenced by ongoing tensions in the Middle East that have continued to impact energy prices.
When excluding gasoline, consumer prices recorded a rise of 2.4 per cent in August. In a notable shift at grocery stores, food prices increased at a slower rate than overall inflation for the first time since July 2024, with a year-over-year rise of 2.8 per cent. The deceleration was prominently driven by a reduction in prices for dairy products, including cheese and yogurt, where the increase was only 0.7 per cent in August compared to the higher 3.1 per cent growth observed in July.
Additionally, there were smaller price increases for pork, condiments, spices, and vinegars, contributing to the overall slowdown in grocery inflation. Consumers also experienced a decrease in clothing costs, reflected by a 1.1 per cent annual decline in prices for apparel in August. This reduction was amplified by a 2.3 per cent drop in men's clothing prices and a 1.9 per cent decrease in children's clothing. Despite these reductions, Canadians found themselves paying more for travel, as fuel surcharges increased and airlines adjusted to a significant decrease in Canadian travel to the United States, which was recorded in 2025.
Rent prices showed a noticeable upward trend, rising 2.8 per cent year-over-year in August, up from a 2.5 per cent increase in July. The Atlantic provinces exhibited the highest rates of inflation across Canada for the month, with notable escalations in prices experienced in Nova Scotia, Prince Edward Island, and Newfoundland and Labrador, as reported by Statistics Canada.
CIBC Economics provided insights into the inflationary landscape, indicating that while the headline inflation number remained elevated in August, there were limited signs that increasing energy costs were causing broader price hikes. Senior economist Andrew Grantham remarked that an interest rate decision from the Bank of Canada is approaching, yet with additional data on inflation, employment, and economic growth forthcoming, it is anticipated that the central bank will maintain its current interest rates without change.
Grantham emphasized that despite the potential for an energy-driven re-acceleration in headline inflation, the central bank is likely to hold its stance due to the downside risks posed to economic growth from U.S. trade policies. Furthermore, core measures of inflation appear to provide policymakers with reassurance that elevated energy prices are not translating into widespread inflationary pressures across the economy.
