Consumer prices rose 2.2% in July

Consumer prices rose 2.2% in July compared with July 2006, identical to the increases of the three previous months.

For the fourth straight month, most of the average growth in consumer prices was attributable to costs associated with owned accommodation (+4.8%). Declines in prices for gasoline and computer equipment and supplies dampened the upward pressure on average prices.

The all-items index excluding energy rose 2.5% from July 2006 to July 2007, faster than in June (+2,2%).

The Bank of Canada's core index advanced 2.3% in July after posting a 2.5% increase in June. This index is used by the Bank of Canada to monitor the inflation control target.

The all-items index edged up 0.1% between June and July 2007 after falling 0.2% between May and June. Higher prices for women's clothing and traveller accommodation, and increased mortgage interest cost were largely offset by lower prices for motor vehicle purchases and leases, natural gas and fresh vegetables.

The all-items index without energy and the core index both rose 0.1% between June and July 2007. These indexes were unchanged between May and June.

12-month change: Owned accommodation costs remain major contributor for a fourth straight month

The 12-month rise in the Consumer Price Index (CPI) was mainly due to higher costs for owned accommodation and, to a lesser extent, food.

For the fourth straight month, owned accommodation costs were the main contributor to the year-over-year increase in the CPI.

The component that contributed the most to the increase of owned accommodation costs was mortgage interest cost, which rose 6.0%, faster than in June (+5.7%). This was the highest rate of growth posted since December 2000.

Higher mortgage rates fuelled the increase in mortgage interest cost. In previous months, the growth in mortgage interest cost had been mainly attributable to higher prices for new homes.

Homeowners' replacement cost also contributed to the increase in the CPI in July. This component, which represents the worn-out structural portion of housing and is estimated using new housing prices (excluding land), increased 6.2% between July 2006 and July 2007. This was up slightly from the 6.1% increase observed in June, a second consecutive acceleration for this component following eight months of slowdown.

In July, consumers spent 3.6% more for restaurant meals and 2.7% more for food purchased at grocery stores than in July 2006. In spite of this increase, fresh fruit prices were down 3.7% in July 2007 from July 2006.

Upward pressure on the all-items index was partially offset by falling prices for gasoline, computer equipment and supplies, and natural gas.

Lower gasoline prices were recorded in all provinces except in the Prairies and Newfoundland and Labrador. The 2.8% drop in gasoline prices from July 2006 accounted for most of the dampening effect on the rise in consumer prices.

Natural gas prices declined 3.2% in July. Prices for this component had increased 1.9% in June after 11 months of consecutive reductions.

Consumers continued to enjoy declines in prices for computer equipment and supplies (-17.7%) and video equipment (-8.6%).

Owned accommodation cost in Alberta slows down

The increase in consumer prices was between 1.0% and 2.0% in all provinces except Alberta (+5.0%), Saskatchewan (+3.2%), Manitoba (+2.2%) and New Brunswick (+2.2%).

Despite the increase in Alberta in July, the province recorded the most significant slowdown since October 2003. From June 2006 to June 2007, the CPI grew 6.3% in Alberta.

The cost of owned accommodation rose 13.9% in Alberta, the smallest increase since May 2006. The slowdown compared with June was mainly due to slowing growth in homeowners' replacement cost. This cost increased 17.8% in July compared with a rise of 23.6% in June.

In Saskatchewan, the 15.2% increase in the cost of owned accommodation was driven mainly by a leap in homeowners' replacement cost (+37.7%), which surpassed the 31.8% climb in June.

The smallest increases in the CPI were observed in Newfoundland and Labrador (+1.0%), Prince Edward Island (+1.3%) and Quebec (+1.3%). In these provinces, the rise in prices can largely be attributed to mortgage interest cost.

From June to July 2007: Moderate growth in the CPI

Average prices rose 0.1% between June and July after dropping 0.2% between May and June.

Upward pressures from women's clothing, traveller accommodation and mortgage interest cost were largely offset by lower prices for motor vehicle purchases and leases, natural gas and fresh vegetables.

Women's clothing prices climbed 4.0% in July following a 4.3% downturn in June.

Traveller accommodation cost increased 4.6% between June and July. While the increase was lower than that in July 2006 (+5.8%), it remains in line with price shifts regularly observed during the peak tourist season.

Mortgage interest cost rose 0.8% in July, the largest month-over-month increase since August 1994. This followed six consecutive months of 0.4% increases. The growth in July was mainly due to the increase in mortgage rates.

Consumers were able to purchase and lease motor vehicles for 1.6% less than in June, following a decrease of 0.3% over the preceding month. Such downward movement is common at this time of the year when discounts are given to reduce inventories of the current year's models.

The 4.6% drop in natural gas prices also mitigated the monthly increase in the CPI. The decline observed in July was related to the price decreases posted in Alberta (-15.3%), Ontario (-3.3%) and Quebec (-1.7%).

Consumers spent 5.6% less for fresh vegetables in July compared with the previous month. This decrease is seasonal and reflects the arrival of local harvests in grocery stores.

Note: Users of the urban centre indexes should note that, effective July 2007, Statistics Canada has corrected the weights of some urban centres that were in error in the Consumer Price Index 2005 basket update.

The weights of St. John's, Charlottetown, Halifax, Saint John, Québec, Montréal, Ottawa, Thunder Bay, Winnipeg, Regina, Saskatoon, Edmonton, Calgary and Victoria were adjusted, while those of Toronto, Vancouver, Whitehorse, Yellowknife and Iqaluit were not.

With this correction, the July level of each urban centre index has been restored to reflect the correct movement for May and June. The published urban centre indexes for May and June will remain unchanged.

The calculation of urban centre indexes is separate from the calculation of the provincial and national indexes. Therefore, the correction made to the urban centre weights has no effect on the provincial or national indexes.

Published weight documentation was also not affected.

Available on CANSIM: tables 326-0009, 326-0012, 326-0015 and 326-0020 to 326-0022.

Definitions, data sources and methods: survey number 2301.

More information about the concepts and use of the CPI are also available online in Your Guide to the Consumer Price Index (62-557-XIB, free) from the Publications module of our website.

Available at 7 a.m. online under The Daily module of our website.

The July 2007 issue of the Consumer Price Index, Vol. 86, no. 7 (62-001-XWE, free) is now available from the Publications module of our website. A paper copy is also available (62-001-XPE, $12/$111). A more detailed analysis of the CPI is available in this publication.

The August Consumer Price Index will be released on September 19.

For more information, or to enquire about the concepts, methods or data quality of this release, contact Client Services (toll-free               1-866-230-2248       ;               613-951-9606       ; fax 613-951-1539; prices-prix@statcan.ca), Prices Division.