Economy
Canada’s inflation rate slows to 7.6% in July as gas prices fall
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OTTAWA — Canada’s year-over-year inflation rate slowed to 7.6 per cent in July, with the deceleration largely driven by a decline in gas prices.
The inflation rate hit a nearly 40-year-high of 8.1 per cent in June, but economists were widely expecting inflation to have since slowed.
In its latest consumer price index report, Statistics Canada said the July saw the smallest monthly gains since December 2021.
It also marks the first decline in the key inflation rate since June 2020.
The federal agency said gas prices rose 35.6 per cent in July from the same month a year earlier, compared with June’s whopping 54.6 per cent gain.
The agency said the downward pressure on prices at the pump was due to a combination of factors, including ongoing concerns related to a slowing global economy, increased COVID-19-related public health restrictions in China and slowing demand for gasoline in the United States.
But while gas prices declined, food prices at grocery stores rose at the fastest pace since August 1981, with prices up by 9.9 per cent on a year-over-year basis compared with 9.4 per cent the previous month.
Tu Nguyen, an economist with accounting and consultancy firm RSM Canada, said despite the decline in gas prices, the “pervasiveness” of inflation across the economy means there’s still a ways to go before pressure on Canadians’ finances eases substantially.
“It will be a while until households can breathe a sigh of relief. Wage growth continues to lag inflation, resulting in households losing purchasing power,” Nguyen said in a note.
Average hourly wages rose by 5.2 per cent in July compared with a year ago.
Bakery goods are up 13.6 per cent since last year amid higher input costs as the Russian invasion of Ukraine continues to put upward pressure on wheat prices. The prices of other food products also rose faster, including eggs, which are up 15.8 per cent, and fresh fruit, up 11.7 per cent since last year.
As mortgage costs increase with higher interest rates, the report notes rent prices are accelerating, rising faster in July than the previous month.
With more Canadians travelling during the busy summer season, airfares rose by around 25 per cent in July compared with the previous month. Traveller accommodation prices rose by nearly 50 per cent since a year ago, with the largest price increases in Ontario.
As countries around the world struggle with skyrocketing prices, there are some signs inflation is beginning to ease, with the U.S. seeing its inflation rate decline in July as well.
Still, inflation is well above the Bank of Canada’s two per cent target.
The central bank is watching the latest reading of inflation as it gears up to make its next key interest rate on Sept. 7, when it’s expected to raise borrowing rates again.
This report by The Canadian Press was first published Aug. 16, 2022.
Nojoud Al Mallees, The Canadian Press
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Japanese government maintains view that economy is in moderate recovery – ForexLive
Economy
Can falling interest rates improve fairness in the economy? – The Globe and Mail
The ‘poor borrower’ narrative rules in media coverage of the Bank of Canada and high interest rates, and that’s appropriate.
A lot of people have been financially slammed by the rate hikes of the past couple of years, which have made it much more expensive to carry a mortgage, lines of credit and other borrowing. The latest from the Bank of Canada suggests rate cuts will come as soon as this summer, which on the whole would be a welcome development. It’s not just borrowers who need relief – the boarder economy has slowed to a crawl because of high borrowing costs.
But high rates are also a big win for some people. Specifically, those who have little or no debt and who have a significant amount of money sitting in savings products and guaranteed investment certificates. The country’s most well-off people, in other words.
Lower rates will mean diminished returns for savers and less interest paid by borrowers. It’s a stretch to say lower rates will improve financial inequality, but they do add a little more fairness to our financial system.
Wealth inequality is often presented as the chasm between well-off people able to pay for houses, vehicles, trips and high-end restaurant meals and those who are driving record use of food banks and living in tent cities. High interest rates and inflation have given us more nuance in wealth inequality. People fortunate enough to have bought houses in recent years are staggering as they try to manage mortgage payments that have risen by hundreds of dollars a month. You can see their struggles in rising numbers of late payments and debt defaults.
Rates are expected to fall in a measured, gradual way, which means their impact on financial inequality won’t be an instant gamechanger. But if the Bank of Canada cuts 0.25 of a percentage point off the overnight rate in June and again in July, many borrowers will start noticing how much less interest they’re paying, and savers will find themselves earning less.
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Rob’s personal finance reading list
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Anyone who has renovated a kitchen lately knows how expensive stone countertops can be. Look after yours by protecting it from a few common kitchen items.
What you need to know about stock market corrections
A helpful explanation of stock market corrections. It seems an opportune time to look at corrections, given how volatile stocks have been lately. Like scouts, investors should always be prepared.
Food inflation requires more careful grocery shopping. Here’s a roundup of food products – cookies, snacks, ice cream – that don’t taste as good as they used to. Food companies have always adjusted their recipes from time to time. Is this happening more because of inflation’s impact on raw material prices? A U.S. list – most products are available are familiar to Canadians, too.
Ask Rob
Q: I have Tangerine children’s accounts for my kids. Can you suggest a better alternative?
A: The rate on the Tangerine children’s account is 0.8 per cent, which actually compares well to the big banks and their comparable accounts. For kids aged 13 and up, check out something new called the JA Money Card.
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A comprehensive guide on how to build a good credit score.
In the social sphere
Social Media: An offbeat way of fighting high food costs
Watch: Is now the hardest time ever to buy a home?
Money-Free Zone: Singer-songwriter Maggie Rogers has a new album called Don’t Forget Me and it’s generating some buzz because it’s a great listen. Smooth vocals and a laid back countryish vibe that hits a faster pace on one of my favourite cuts, Drunk.
More PF from The Globe
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More Rob Carrick and money coverage
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Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: Why millennials and Gen Z are Alberta-bound for a more affordable life • Rising interest rates brought pain for new homeowners – and opportunity for house hunters • Why more Canadians are choosing to be childfree or delay parenthood • Love in the time of inflation: How to manage rising costs when dating • You’re not bad at money – you’re suffering from money shame • Retirement might look different for Gen Z and millennials. Here’s how to plan for it • Recession-beating tips for the job market, housing, investing and the cost of life • Is the middle class dead for millennials and Gen Z?
- ✔️ The housing file: A house isn’t special. Get your head straight about the reality of home ownership • The good, the sad and the unaffordable: Saving for a home downpayment in Canada’s big cities • Property taxes are popping in some cities – how worried should you be about other tax hikes? • Our other real-estate problem – people have too much wealth tied up in houses • Borrowers and savers, here’s how to time the eventual rollback of interest rates
- 📈 Investing: Canada’s top digital broker is TD Direct Investing, with an assist from the TD Easy Trade app • 2023 Globe and Mail ETF buyer’s guide part one: Canadian equity ETFs • For the ultimate in cheap investing, check out the Freedom .08 ETF Portfolio • Yes, there is risk in Canadian bank deposits for the unwary and complacent • CDIC covers bank deposits, but who protects your investments if your broker goes bust? • Answers to your questions about the low-risk ETF paying almost 5% • Happy fifth birthday to one of the all-time best investing products for everyday people • An investing strategy that wins cleanly over the long term by outperforming in bad years like 2022
- 💰 Your money: Mortgage holders, savers and GIC investors, it’s time to change your thinking on interest rates • How much debt is each generation of Canadians carrying, and how do you compare? • For the sake of their financial futures, young people should leave Toronto and Vancouver • This practical new spin on a savings account might just peel you away from your big bank • Rental fraud grows amid rise in fake, falsified tenant applications • Are Canadians worse off financially now than in the 1980s? • From groceries to auto loans, here’s how much more it costs to live right now • When saving for retirement, should you change your asset mix over the course of your career? • Do retirement income needs always rise alongside inflation? Not necessarily • When the bank suggests you lock in your variable rate mortgage, it has an angle
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LIVE: Freeland joins panel on Indigenous economy CTV News Montreal
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