Higher gas prices expected to nudge Canada’s inflation rate back near 3% in July, economists say

July 2026 saw annual consumer price inflation holding steady at 3.4%, according to the Central Statistics Office (CSO). This aligns with the 3.4% increase recorded in June. Consumer prices climbed 0.1% on a monthly basis. The most notable monthly increases were in the recreation, sport, and culture sector, which rose by 2.7%, and in housing, water, electricity, gas, and other fuels, which saw a 0.8% rise. Conversely, clothing and footwear prices dropped by 5.1%, while transport costs fell by 0.9%.

Edel Flannery, a Senior Statistician at the Prices Division, explained that the rise in housing, water, electricity, gas, and other fuels was driven by increased electricity costs and mortgage interest. However, a decrease in home heating oil prices partially offset this. Across the year, prices excluding energy and unprocessed foods experienced a 3.2% increase, with education services, clothing and footwear, housing, water, electricity, gas, and other fuels, and insurance and financial services recording the largest growths.

This marks the first time since December 2021 that no division recorded an overall decline in prices compared to July 2025. Despite the stabilization in inflation, Deloitte's Chief Economist, Kate English, cautioned that inflation will remain a significant concern as the autumn and winter months approach. She highlighted that electricity prices surged by 3.7% in the month, raising the annual inflation rate to 8.1%, its highest level since late 2023.

English noted that while energy prices are still lower than in 2022 and 2023, they remain considerably higher than prior years. The uncertainty surrounding energy prices due to developments in the Gulf region and persistent heat waves in Europe will be a key issue for Ireland and Europe during the winter.

Gas reserves are currently lower than their average for this time of year. Additionally, English emphasized that food prices, driven by higher fertiliser costs, the heatwave's impact on input costs, and crop yields in Ireland and key trading partners, will be closely monitored in the coming months. Meanwhile, the CSO released the National Average Prices for several staple items.

Notably, a pound of butter saw its price drop by 55c over the past year, while a 2.5kg bag of potatoes, 2 litres of full-fat milk, Irish cheddar per kg, a sirloin steak per kilogram, and an 800g loaf of brown sliced pan all experienced a 9c decrease. Conversely, the price of an 800g loaf of white sliced pan remained unchanged compared to the same month last year.

In terms of fuel prices, a litre of diesel increased to €1.76, a 6c rise from the previous year, while petrol rose by 5c to €1.77 per litre. Flannery noted that July's prices might not fully reflect recent increases in diesel, petrol, and home heating oil costs due to the ongoing situation in the Middle East.