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Inflation rate rises to 1.2% in June

Rising gasoline and car prices fuelled the first significant spike in Canada's cost of living since February last month, lifting the annual inflation by half a point to 1.2 per cent -- still low by historical standards.

Overall, consumer prices were higher in six of the eight major components tracked by Statistics Canada. The exceptions were health and personal care costs, and recreation, education and reading.

The increase from 0.7 per cent in May put Canadian inflation rate back into the desired range of between one and three per cent that the Bank of Canada strives to achieve.

Inflation remains well below the central bank's ideal target of two per cent, however, a level the central bank does not expect to reach for some time.

Still, the bank will find comfort that inflation is beginning to normalize -- after falling to a super-low 0.4 per cent in April.

The June increase in the consumer price index is not expected to have a significant impact on markets, as economists had accurately predicted the rise.

The major contributors in June were a 4.6-per-cent increase in gasoline prices at the pump, and a two-per-cent hike in the cost of purchasing a new motor vehicle, which Statistics Canada attributed to smaller monthly price declines compared to June 2012.

On a month-to-month basis, gasoline was 2.8 per cent higher than it was in May.

More modest increases were recorded in food prices, up 1.2 per cent from a year ago, and shelter costs, also up 1.2 per cent.

On individual items, natural gas jumped 11.3 per cent, rent was up 1.7 per cent and property taxes were 2.8 per cent higher.

The Bank of Canada's core inflation index -- which excludes certain items that tend to swing wildly -- moved up a more modest 0.2 percentage points to 1.3.

But there were also plenty of items that saw prices continuing to weaken. Mortgage interest costs fell 3.8 per cent, the price for video equipment dipped 9.2 per cent, digital computing equipment decreased 4.3 per cent, prescription medicines slipped 4.1 per cent, and travel tours slowed by 4.8 per cent.

Regionally, prices were higher in all provinces except British Columbia, which recorded its third consecutive month of disinflation, chiefly attributed to a one-per-cent decrease in food costs. The withdrawal of the harmonized sales tax in April is also exerting a downward draft on consumer prices in the province.

Manitoba saw the biggest jump in inflation, rising almost a full point to 2.7 per cent as gasoline prices rose 10.7 per cent.



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