Your Business News

Canada’s inflation declines amid cooling gas prices

September 20, 2022

Authored by RSM Canada LLP

Ian L. FitzPatrick, CPA,CA, CBV shared this article

REAL ECONOMY BLOG | September 20, 2022


Inflation declined by 0.3% in August for the second monthly decline in a row thanks to cooling gasoline and energy prices, according to data released by Statistics Canada on Tuesday.

The consumer price index rose by 7.0% in August on a year-over-year basis, down from a 7.6% gain in July. The easing gives hope that the worst of the inflation woes is behind us.

Somewhat surprisingly, even though August is peak travel season, prices of recreation decreased by 1.6% on a monthly basis from July.

Canada inflation

This represents a possible return to normal after pent-up demand for travel, concerts and festivals sent prices to skyrocket and caused delays across the nation in July.

Transportation prices rose by 10.3% on an annual basis in August and shelter prices were up by 6.6%. While these areas strain many households’ budgets, these numbers represent a marked decline from the past few months.

Notably, gasoline prices and natural gas prices are both quickly declining. In Alberta and Saskatchewan, natural gas prices are on the steepest decline since 2015 as global demand slows

Even more encouraging, measures of core inflation also decreased for the first time since the early days of the pandemic. The Bank of Canada looks at core inflation, which excludes volatile prices, as a way to measure underlying price pressures.

The relief in core inflation provides a powerful signal that the central bank’s rate hikes are having an impact.

But it is not yet time to breathe a sigh of relief. Prices of groceries have increased by 10.8% over the past year, the fastest pace since August 1981 as the ramifications of the war in Ukraine continue to be felt.

Inflation expectations, at least for now, remain elevated, as wages went up by 5.4% on an annual basis. This means that the Bank of Canada still has some work to do.

The takeaway

Amid cooling demand and high interest rates, inflation might fall further over the next few months.

Still, be ready for a 50 basis-point hike by the Bank of Canada next month. While we do not expect another outsized rate hike, the central bank is likely to continue its campaign of rate increases until inflation falls further and expectations are under control. A mild contraction of the economy would be the necessary tradeoff.

Let's Talk!

Call us at 1 855 363 3526 or fill out the form below and we'll contact you to discuss your specific situation.

  • Topic Name:
  • Should be Empty:

This article was written by Tu Nguyen and originally appeared on 2022-09-20 RSM Canada, and is available online at https://realeconomy.rsmus.com/canadas-inflation-declines-amid-cooling-gas-prices/.

RSM Canada Alliance provides its members with access to resources of RSM Canada Operations ULC, RSM Canada LLP and certain of their affiliates (“RSM Canada”). RSM Canada Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM Canada. RSM Canada LLP is the Canadian member firm of RSM International, a global network of independent audit, tax and consulting firms. Members of RSM Canada Alliance have access to RSM International resources through RSM Canada but are not member firms of RSM International. Visit rsmcanada.com/aboutus for more information regarding RSM Canada and RSM International. The RSM trademark is used under license by RSM Canada. RSM Canada Alliance products and services are proprietary to RSM Canada.

FCR a proud member of RSM Canada Alliance, a premier affiliation of independent accounting and consulting firms across North America. RSM Canada Alliance provides our firm with access to resources of RSM, the leading provider of audit, tax and consulting services focused on the middle market. RSM Canada LLP is a licensed CPA firm and the Canadian member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.

Our membership in RSM Canada Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.

For more information on how FCR can assist you, please call us at 1 855 363 3526

Important Notice:

FCR will now redirect you to CCH Portal where your FCR Client Portal login is located.

Share This