Canada Inflation Accelerates in June on Gas, Shelter Costs

(Bloomberg) -- Canadian inflation returned to positive territory in June on higher prices for gas, food and shelter.

The consumer price index climbed 0.7% from the same month a year earlier, after two straight below-zero readings, Statistics Canada reported Wednesday from Ottawa. On a monthly basis, prices jumped 0.8%. Increased gasoline costs, up 11% from May after declining sharply, drove the gains.

Core inflation readings -- seen as a better measure of underlying price pressure -- also unexpectedly picked up, rising slightly to 1.7%, from 1.6% in May.

The numbers were stronger than most expected, but economists predict it will take a long time to get back to more normal levels of around 2%, as sluggish demand limits the ability of companies to raise prices. A weaker outlook for inflation prompted the Bank of Canada this month to indicate it won’t raise borrowing costs for at least another two years.

“The bulk of core inflation’s adjustment to Q2’s economic contraction is likely still ahead of us and we still see core softening a bit further through end-2020,” Brett House, deputy chief economist at Bank of Nova Scotia, said in an email.

Economists in a Bloomberg survey predicted 0.2% for annual inflation and 0.4% for monthly.

The Canadian currency was little changed after the report, trading 0.2% higher to C$1.3437 against its U.S. counterpart at 9:13 a.m. Toronto time.

Electricity costs in Ontario, the country’s most-populous province, surged 17% higher on the month, the most since 2003, the statistics agency reported.

Clothing prices rose 1% in June, recovering some of the declines from a month earlier. Shelter costs were up 0.5% in the month, while food climbed 0.3%.

Food costs increased 2.7% on the year, among the largest contributors to the annual CPI gain.

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