B.C.’s inflation rate heated up last month, reversing a cooling trend that had been providing some relief to the West Coast.
Consumer prices rose to 3.8 per cent in August compared with three per cent in July, according to Statistics Canada data released Tuesday.
The national inflation rate, meanwhile, expanded even more dramatically by reaching four per cent in August compared with 3.3 per cent in July.
Gasoline prices were the main culprits behind the rise in inflation as prices across the country grew 0.8 per cent compared with a 12.9 per cent drop in July. This marks the first time gas prices have gone up since January.
Mortgage interest costs (+30.9 per cent) spiked dramatically year over year as the Bank of Canada went on a rate hike spree that only took a pause earlier this month. Electricity costs (+12.3 per cent) also made significant gains.
The biggest downward contributors were telephone services (-10.4 per cent) and natural gas (-11.1 per cent).
"Things just got a lot more interesting for the Bank of Canada and most definitely not in a good way," BMO chief economist Douglas Porter said in a note.
“We all knew that the extended back-up in gasoline prices was going to be a headache for headline [Consumer Price Index numbers] and inflation expectations, but the inconvenient truth is that [core inflation] has suddenly heated up as well.”
The Bank of Canada has one more inflation report from Statistics Canada to review before its next interest rate decision on Oct. 25.
But Porter said he believes the next inflation report will feature more of the same.
“Today's inflation report has raised the odds they may need to make another move,” TD senior economist Leslie Preston said in a release, referring to the possibility of the Bank of Canada hiking rates next month.
RBC chief economist Nathan Janzen said one “silver lining” of Tuesday’s inflation report was that grocery price growth showed further signs of easing.
“Grocery prices were still up 6.9 per cent year-over-year, but that was smaller than the 8.5 per cent increase in July,” he said in a note.
“Food price growth should continue to ease in the near-term as lower raw food commodity prices and easing domestic supply chain pressures pass through to retail prices with a lag.”
Janzen said he expects the economic backdrop will continue to soften and that the Bank of Canada is unlikely to hike interest rates again this year.
“But the central bank won't hesitate to hike interest rates further if inflation pressures don't show signs of easing,” he said.
Editor's note (Sept. 19, 2023): An earlier version of this story indicated B.C.'s inflation rate stood at 3.5 per cent in July when, in fact, it stood at three per cent. We regret this error.