Canadian consumer prices rose 0.5% in July, compared to much smaller CPI increases in the previous two months. The steep increase in July pushed the twelve-month increase up to 3% compared to a 2.5% gain as of June. While the July price increase was huge, nonetheless there are no signs that inflation in Canada is out of control.

Service sector items were the source of the large price gains in July. Airline costs rose 16.4% in July and were up a whopping 28.2% y/y.  In addition, travel costs rose 7.5% in the month, also far more than normal monthly price increases.

The various measures of core inflation were all tracking at roughly a 2% annual rate of increase in July.

Statistics Canada publishes three measures of core inflation. On a year over year basis, the common measure remained at 1.9%, the median measure was 2%, while the trim measure came in at 2.1%.

In other words, core inflation is roughly in line with the Bank of Canada’s 2% target rate of change.

The Bank of Canada’s Three Additional Measures Of Core Inflation

CPI-trim is a measure of core inflation that excludes CPI components whose rates of change in a given month are located in the tails of the distribution of price changes.

CPI-trim is a measure of core inflation corresponding to the price change located at the 50th percentile (in terms of the CPI basket weights) of the distribution of price changes in a given month.

CPI-trim is a measure of core inflation that tracks common price changes across categories in the CPI basket.