In the latest report published September 19, 2023, Canada’s Consumer Price Index (CPI) for August rose by 4.0% year over year, following a 3.3% increase in July.

This acceleration was primarily due to higher gasoline prices in August, rebounding from a significant decrease in July. When we exclude gasoline, the CPI registered a 4.1% increase in August, consistent with July's figures.

In August, the CPI rose by 0.4% monthly, slightly slower than July's 0.6% increase, but when adjusted for seasonal factors like reduced prices for travel and airfare in the summer, the CPI increased by 0.6% monthly. 

Gasoline Prices Show Yearly Gain

Gasoline prices demonstrated a noteworthy year-over-year increase of 0.8% in August, marking the first yearly gain since January 2023. This reversal followed a 12.9% decline in July. The year-over-year upturn in gasoline prices can be partly attributed to a base-year effect, as prices had fallen by 9.6% in August 2022 due to increased global oil production and lower refining margins.

Monthly data also indicated a 4.6% rise in gasoline prices, contributing to the year-over-year increase for August 2023. This monthly increase was primarily driven by higher crude oil prices, resulting from production cuts by major oil-producing countries.

Shelter Prices Experience Acceleration

Shelter prices exhibited a year-over-year increase of 6.0% in August, compared to a 5.1% rise in July. The acceleration in shelter prices was led by rent, which saw a 6.5% year-over-year increase nationally, up from 5.5% in July. Factors contributing to this growth included a higher interest rate environment, potentially limiting homeownership, and rent price acceleration in several provinces.

Due to the Bank of Canada’s increased interest rates, higher mortgage interest costs also played a role in the acceleration of shelter prices, with a slightly faster pace in August (30.9%) compared to July (30.6%).

Grocery Price Growth Slows but Remains Elevated

Although the year-over-year price growth for groceries slowed in August, prices remained elevated. Food purchased from stores registered a 6.9% increase in August, compared to an 8.5% rise in July. On a monthly basis, grocery prices decreased by 0.4% in August.

Several factors influenced the deceleration in grocery prices, including slower year-over-year growth in prices for fresh fruit, cereal products, and fresh or frozen chicken. However, prices increased for fresh or frozen beef, coffee and tea, as well as sugar and confectionery.

Energy Prices in Alberta

Energy prices in Alberta experienced significant fluctuations. In August, they rose by 13.3% year over year, following a 7.7% decline in July. This increase was driven by higher prices for natural gas and electricity, driven by elevated summer demand.

Natural gas prices in Alberta showed a lesser year-over-year decline in August (-12.5%) compared to July (-32.7%). Electricity prices, after a substantial increase in July, surged by 121.7% year over year in August as provincial rebates that had previously kept prices lower for consumers were phased out.

If you have any questions about today’s Market Update, feel free to call us at 604-643-0101 or email cashgroup@cgf.com.