For the fourth straight month, most of the average growth in consumer prices was attributable to costs associated with owned accommodation (+4.8%). Declines in prices for gasoline and computer equipment and supplies dampened the upward pressure on average prices.
The all-items index excluding energy rose 2.5% from July 2006 to July 2007, faster than in June (+2,2%).
The Bank of Canada's core index advanced 2.3% in July after posting a 2.5% increase in June. This index is used by the Bank of Canada to monitor the inflation control target.
The all-items index edged up 0.1% between June and July 2007 after falling 0.2% between May and June. Higher prices for women's clothing and traveller accommodation, and increased mortgage interest cost were largely offset by lower prices for motor vehicle purchases and leases, natural gas and fresh vegetables.
The all-items index without energy and the core index both rose 0.1% between June and July 2007. These indexes were unchanged between May and June.
12-month change: Owned accommodation costs remain major contributor for a fourth straight month
The 12-month rise in the Consumer Price Index (CPI) was mainly due to higher costs for owned accommodation and, to a lesser extent, food.
For the fourth straight month, owned accommodation costs were the main contributor to the year-over-year increase in the CPI.
The component that contributed the most to the increase of owned accommodation costs was mortgage interest cost, which rose 6.0%, faster than in June (+5.7%). This was the highest rate of growth posted since December 2000.
Higher mortgage rates fuelled the increase in mortgage interest cost. In previous months, the growth in mortgage interest cost had been mainly attributable to higher prices for new homes.
Homeowners' replacement cost also contributed to the increase in the CPI in July. This component, which represents the worn-out structural portion of housing and is estimated using new housing prices (excluding land), increased 6.2% between July 2006 and July 2007. This was up slightly from the 6.1% increase observed in June, a second consecutive acceleration for this component following eight months of slowdown.
In July, consumers spent 3.6% more for restaurant meals and 2.7% more for food purchased at grocery stores than in July 2006. In spite of this increase, fresh fruit prices were down 3.7% in July 2007 from July 2006.
Upward pressure on the all-items index was partially offset by falling prices for gasoline, computer equipment and supplies, and natural gas.
Lower gasoline prices were recorded in all provinces except in the Prairies and Newfoundland and Labrador. The 2.8% drop in gasoline prices from July 2006 accounted for most of the dampening effect on the rise in consumer prices.
Natural gas prices declined 3.2% in July. Prices for this component had increased 1.9% in June after 11 months of consecutive reductions.
Consumers continued to enjoy declines in prices for computer equipment and supplies (-17.7%) and video equipment (-8.6%).