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Canada’s inflation rate continues to accelerate

Stronger purchases at grocery among the biggest contributors of retail sales growth in July

The country’s annual inflation rate continued to accelerate last month with a boost from higher costs for gasoline, hotels and airline tickets.

Statistics Canada said Friday inflation hit 1.4% in August — up from 1.2% in July and a two-year low of just 1% in June.

The upward forces driving inflation were led by year-over-year price increases last month of 8.6% at the gas pump, 6.3% for traveller accommodation and 6.2% for air transportation.

The August reading brought inflation closer to the Bank of Canada’s ideal target of 2% and supported the bank’s predictions that recent softness was mostly temporary.

Two of the central bank’s three measures of underlying inflation, which seek to look through the noise of more-volatile items like gasoline, also saw increases in August.

Motivated by a stronger-than-expected economy, the inflation-targeting bank has raised its benchmark interest rate twice since July and many analysts expect it to continue along its hiking path over the next year.

Consumer prices rose at a faster pace in nine of the 10 provinces in August, while the pace of inflation held steady in Manitoba, the federal statistical agency said.

The pace of inflation in Saskatchewan saw the biggest acceleration of any province — climbing to 1.7% in August from 0.8% in July — in large part due to the application of the provincial sales tax in new areas. Higher prices in Prince Edward Island last month were partly linked to sales tax increases.

The biggest contributors to the downward pressures were cheaper year-over-year prices for electricity, computers and digital devices as well as household appliances.

On Friday, Statistics Canada also released retail trade numbers for July that showed total sales reached $49.1 billion after rising 0.4%, compared with the previous month.

In July, stronger auto sales as well as purchases at grocery, liquor and corner stores made the biggest contributions to the growth.

Retail e-commerce sales climbed 46.8% in July compared with a year earlier on an unadjusted basis, while total retail sales expanded by 6.7%.

E-commerce still made up just 2.3% of overall retail trade in July. But it took a larger portion of all sales compared with a year earlier when its share was just under 1.7%.

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