Canadian inflation fell to seven percent in August, Statistics Canada said Tuesday.
Economists had expected interest rates to come in at 7.3 percent, after inflation rose to a 40-year high of 8.1 percent earlier this summer.
Instead, the rate actually fell more than expected, largely because gasoline became much cheaper during the month.
Gas prices fell 9.6 percent in August compared to the previous month. That’s the biggest single-month drop in gasoline prices since April 2020, when the pandemic just started.
While gasoline got a little cheaper, food prices continued to rise — grocery costs have risen 10.8 percent over the past year.
That’s the fastest increase in the typical grocery bill since 1981.
“Food supply continued to be impacted by multiple factors, including extreme weather, higher input costs, the Russian invasion of Ukraine and supply chain disruptions,” the data agency said.
Bakery products have increased by more than 15 percent in the past year, while fruit has increased by more than 13 percent.
The fall in inflation will come as a relief to the Bank of Canada, which has aggressively raised its benchmark interest rates to cool things down.
But even at 7 percent, official inflation is still more than twice what the central bank would like.
Beneath the overall decline in numbers, there were more encouraging signs that underlying inflation could ease. So-called core inflation — which excludes volatile items like food and energy — fell to 5.2 percent, from 5.4 percent the previous month.
Leslie Preston, an economist at TD Bank, says there are reasons to hope inflation is behind us.
“A journey of a thousand miles starts with a single step,” she said. “Canadian inflation took one step in the right direction in August, but there is still a long way to go.”