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Gas prices pushed inflation rate to 3.4 per cent in July


August 25, 2008
By Statistics Canada

Aug. 25,
2008 – Consumer prices rose 3.4 per cent in July 2008 compared with
July 2007, an increase from the 3.1 per cent rise recorded in the 12
months to June 2008. Higher gasoline prices continued to exert the
strongest upward pressure on consumer prices.

July saw
the highest 12-month increase since March 2003. A climb in gasoline
prices was the primary source of higher consumer prices in July. The
12-month variation in the Consumer Price Index (CPI) and the gasoline
price index have been increasing at a faster pace over the past four
months.

Consumer prices excluding gasoline advanced 2.1per cent, up from the 1.8 per cent 12-month rate of growth posted for June.

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Lower prices to purchase and lease passenger vehicles partially offset
the impact of rising gasoline prices and eased the overall increase in
transportation costs for consumers.

12-month change: Consumers continue to feel the pinch of higher gasoline prices


Gasoline prices were the main factor behind the climb in consumer prices from July 2007 to July 2008.

Prices at the pump rose 28.6 per cent in the 12 months to July 2008.
While gasoline prices continued to rise, the overall increase in
transportation costs was partially offset by lower prices to purchase
and lease passenger vehicles, which fell 8.9 per cent in July compared
with the same month a year earlier. Overall, transportation costs rose
by 6.1 per cent in the 12 months to July 2008.

The mortgage interest cost index advanced 8.5 per cent from July 2007
to July 2008, down from the 9.0 per cent increase posted in the 12
months to June. The slowdown in the rise in mortgage interest cost was
due more to a softening of new housing prices rather than to lower
mortgage interest rates.

Higher natural gas prices (+25.0 per cent) also contributed to the rise
in consumer prices in July. The increase in natural gas prices was
partly due to a decline in prices that occurred at the same time last
year and to recent increases related to oil prices.

Prices for fuel oil and other fuels, products which are derived from
oil, also put significant upward pressure on consumer prices in July.

A 4.3 per cent rise in prices for food purchased from stores, led by a
13.2 per cent rise in prices for bakery products, continued to exert
upward pressure on consumer prices in July. Price increases for other
food products closely related to grain, such as breakfast cereal, rice,
pasta and flour and flour based mixes, continued to increase in the 12
months to July 2008.
The drop in prices to purchase and lease passenger vehicles helped to
offset the rise of the all-items index in July. Competition among
vehicle manufacturers remains strong as manufacturers compete for
market share by increasing incentives.

Prices for computer equipment and supplies continued to fall in July
(-12.0 per cent), although the decline was the smallest since August
2003. Prices for other electronic equipment items such as video
equipment and photographic equipment and supplies also continued their
downward trend in July.

The provinces: The three most eastern provinces bear the brunt of increasing consumer prices

Consumers in Prince Edward Island (+5.3 per cent), Newfoundland and
Labrador (+4.2 per cent) and Nova Scotia (+4.2 per cent) faced the
largest consumer price increases.

Gasoline prices contributed largely to the rise in consumer prices
observed across the country. Gasoline prices rose the most in British
Columbia (+31.5 per cent).

Other provinces, especially those in Central Canada, also posted strong
price increases for gasoline. In Ontario, gasoline prices rose 30.1 per
cent and in Quebec they increased 30.9 per cent.

Besides higher prices for gasoline, price increases for other energy
components, such as fuel oil and other fuels and electricity, rose
sharply in Newfoundland and Labrador, Prince Edward Island and Nova
Scotia in the 12 months to July. The rise in these energy components
largely accounted for the growth in consumer prices posted in these
provinces.

In Alberta, it was higher costs for owned accommodation that primarily
pushed up consumer prices 3.5 per cent in the 12 months to July. This
was a substantial slowdown from the 4.4 per cent rate of growth posted
in June.

While consumers across the country faced higher prices for gasoline and
mortgage interest costs, lower prices to purchase and lease passenger
vehicles helped to offset these price increases. Changes in prices to
purchase and lease passenger vehicles ranged from a 7.6 per cent
decrease in Quebec to an 11.4 per cent decline in New Brunswick.


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