OTTAWA -- The increased cost of filling a grocery cart over the past year was more than enough to offset a drop in the price of putting gas in the car, according to the latest inflation report from Statistics Canada.
The federal agency said Friday that the consumer price index in July was up 1.3 per cent compared with a year ago, compared with an increase of 1.0 per cent in June.
Economists had expected an increase in the consumer price index of 1.4 per cent, according to Thomson Reuters.
TD Bank economist Brian DePratto said July marked the third consecutive month of rising inflation amid a trend of increasing food prices and lower gasoline prices.
"Some of the price pressures we are seeing are special factors to some degree," he said, noting that the rise in meat prices is "a bit of an oddity."
"It is not inconsistent with the view that we're sort of through the worst of that (first half) contraction. Now for the second half of the year, we expect a slow and steady return to growth."
The inflation report came as Statistics Canada also reported retail sales for June increased 0.6 per cent to $43.2 billion, topping expectations for a gain of 0.2 per cent, according to Thomson Reuters.
However, after removing the effects of price changes, retail sales in terms of volume were flat in June.
The retail sales report added support to the notion that the economy likely grew in June to end a streak of five consecutive months of contraction.
"Given earlier reported increases in wholesale and manufacturing sale volumes, we expect overall monthly GDP growth rose 0.2 per cent in June, which would mark the first increase in six months," RBC economist Nathan Janzen wrote in a report.
Economists have suggested the economy contracted in the second quarter after also pulling back in the first quarter -- a technical recession. However most have forecast growth to resume in the second half of the year.
The Bank of Canada's core index, which excludes some of the most volatile items, was up 2.4 per cent from a year ago -- in line with estimates.
Core inflation has been above the two per cent level for 12 straight months, but DePratto said the Bank of Canada has not appeared concerned.
"It is something that is on the horizon for them, but the growth story is probably the more important one for the Bank of Canada," he said.
In its monetary policy report last month, the central bank noted core inflation has been above two per cent in recent months, but attributed it to "transitory effects" including the drop in the Canadian dollar and some sector-specific factors.
The Bank of Canada estimated the underlying trend in inflation is about 1.5 to 1.7 per cent.
Leading the increase in annual inflation was an increase in food prices, which were 3.2 per cent higher compared with a year ago, boosted by meat prices, which rose 6.1 per cent. The price of fresh or frozen beef was up 17.2 per cent from a year ago, while fresh or frozen pork gained 2.0 per cent.
Prices for food bought from stores was up 3.5 per cent, while food bought in restaurants was up 2.7 per cent.
Statistics Canada said the transportation index, which includes gasoline, was the only one of eight components to show a decline. It was down for the ninth month in a row.
The transportation component dropped 1.7 per cent compared with a year ago as the gasoline index fell 12.2 per cent. Partially offsetting the drop in gasoline prices was a 2.5 per cent increase in the cost of passenger vehicles.
July inflation rates for Canadian provinces, territories
OTTAWA - Canada's national inflation rate was 1.3 per cent in July, Statistics Canada says. Here's what happened in the provinces and territories. (Previous month in brackets):
-- Newfoundland and Labrador, 0.7 (0.6)
-- Prince Edward Island, -0.1 (-0.1)
-- Nova Scotia, 0.9 (0.8)
-- New Brunswick, 1.2 (1.0)
-- Quebec, 1.3 (1.0)
-- Ontario, 1.5 (1.0)
-- Manitoba, 1.0 (1.0)
-- Saskatchewan, 1.9 (1.9)
-- Alberta, 1.3 (1.7)
-- British Columbia, 1.0 (0.8)
-- Whitehorse, Yukon, 0.2 (-0.2)
-- Yellowknife, N.W.T., 2.0 (2.0)
-- Iqaluit, Nunavut, 1.9 (1.9)
