Canadian inflation warms up to 1.3% in July

The cost of living in Canada increased at an annual rate of 1.3 per cent in July, slightly higher than the previous month as food prices got more expensive, even as energy kept getting cheaper.

Statistics Canada's consumer price index had risen at an annual rate of just one per cent in June.

The showing was slightly lower than the 1.4 per cent that economists had been expecting..

Still, 1.3 per cent inflation represents the highest reading this year,and that prompted some analysts to point out what may be driving it.

"There are many signs that the weaker [Canadian dollar] ispumping core inflation," BMO chief economist Doug Porter said in a note. "Forexample, furniture andappliance prices are up 4.1 per cent yearoveryear, the fastestincrease since the GST went into effect in 1991."

Food prices increased 3.2 per cent, led by meat prices, which rose 6.1 per cent in the previous year.

On the flipside, the transportation index which includes gas prices continued to trend lower, declining by1.7 per cent.

Nine provinces have seenconsumer pricesrise over the past 12 months. The highest inflation rate was in Saskatchewan, at 1.9 per ecnt.

The only provincethat didn't see a positive inflation rate, P.E.I. Its annual inflation rate came in at 0.1 per cent in July, making it the only province to record deflation over the past year.

Core rate nudges higher

Nationally, the core rate of inflation, which excludes such volatile components as gasoline,fruit and vegetables, and cigarettes, ticked up slightly to 2.4 per cent annually.

While that figure is above the Bank of Canada's mid-range target of two per cent inflation, some economists believethe central bank's next interest rate move will depend more on economic growth.

"Our expectation is that as exports start to respond more strongly to a rebounding U.S. economy and weakening Canadian dollar, positive growth will resume in the third quarter," said RBC assistant chief economist Paul Ferley.

He said ifthat's the case, the Bank of Canada wouldlikely keep current rates into 2016.