Economists had expected the rate to stand at 7.3% after inflation rose to a 40-year high of 8.1% earlier this summer. Instead, the rate fell even more than expected, largely because gasoline became much cheaper during the month. Natural gas prices fell 9.6% in August compared to the previous month. This is the biggest drop in gasoline prices in a month since April 2020, when the pandemic was just beginning. While gas got a little cheaper, food prices continued to rise — grocery costs rose 10.8 percent over the past year. This is the fastest increase in the typical grocery bill since 1981. “Food supply continued to be affected by multiple factors, including extreme weather events, higher input costs, Russia’s invasion of Ukraine and supply chain disruptions,” the data service said. Bakery products rose more than 15 percent last year, while fruit rose more than 13 percent. While grocery bills show no sign of abating, other price increases are starting to slow, with housing costs rising 6.6 percent over the past year. On a monthly basis, inflation decreased by 0.3%. That’s the biggest monthly easing since 2020. And so-called core inflation — which strips out volatile items like food and energy — eased to 5.2 percent, from 5.4 percent the previous month. “The relief in core inflation provides a strong signal that the Bank of Canada’s rate hikes are having an impact,” said Tu Nguyen, economist at consultancy RSM Canada. But even at seven percent, official inflation is still more than double what the central bank wants to see. Which means consumers and borrowers will have to wait for even more interest rate hikes. “Food prices are still rising rapidly and rapid wage growth means inflationary pressures remain [so] it is not yet time to breathe a sigh of relief,” Nguyen said.
