Inflation rate rose slightly to 1.9% in June as vehicle and clothing prices climb

The pace of inflation sped up to 1.9 per cent in the month of June as costs for cars and clothes increased, Statistics Canada said Tuesday.

Passenger vehicles prices rose significantly in June — rising 4.1 per cent year over year, compared to a 3.2 per cent increase in May. Used passenger vehicles had their first year-over-year increase in 18 months, according to Statistics Canada. New cars also increased in price, with the inflation rate climbing to 5.2 per cent in May.

Costs for clothing and footwear accelerated last month, rising two per cent year over year in June. Statistics Canada says that came as a result of tariff uncertainty hitting the clothing industry in particular.

And in the grocery aisle, prices rose 2.8 per cent, after rising 3.3 per cent the month prior. Price growth in that category slowed in large part due to price decreases for fresh fruits and vegetables — the first decline in that category since October 2021, says the data agency.

Statistics Canada said gasoline prices were nearly unchanged in June as higher crude oil prices and geopolitical conflicts ratcheted up pressure at the pumps.

The new numbers come after the agency said the pace of inflation held steady in May at 1.7 per cent.

The headline inflation figure is in line with what economists were expecting — in a poll by Reuters ahead of the release, economists predicted the annual pace of inflation would rise to 1.9 per cent for the month.

Douglas Porter, chief economist at BMO Financial Group, said that inflation showed no real improvement in June, in part because pressures of the trade war pushed some prices up.

As a result, Porter says it's unlikely the Bank of Canada will cut interest rates later this month.

"If the solid employment report was the icing on the cake for that decision, this is the cherry on top," Porter said in a note. "We'll need to see a material deceleration [in inflation] … for a cut in even the September meeting to be in play."

South of the border, inflation was also on the rise — consumer prices rose 2.7 per cent in June from a year earlier, up from an annual increase of 2.4 per cent in May, according to the U.S. Department of Labour.

The uptick there was driven by a range of higher prices. The cost of gas rose one per cent just from May to June, while grocery prices increased 0.35. Appliance prices jumped for the third straight month.