Despite strong advances in the housing sector, weakening gasoline prices slowed down the 12-month growth of prices paid by consumers in August. This is the third consecutive month that the Consumer Price Index declined.

Between August 2005 and August 2006, the CPI posted a 2.1% increase, falling back for a third consecutive month. Such a persistent decline in the 12-month variation of the all-items index has not occurred since September 2004.

The decline from 2.4% to 2.1% in the 12-month change of All-items CPI between July and August 2006 was mainly attributable to the slowdown in gasoline prices increase paid by drivers at the pump. Gasoline prices only increased 0.1% from July to August, leading to a slowdown in the 12-month change in the gasoline index, which dropped from 16.1% between July 2005 and July 2006 to 9.0% between August 2005 and August 2006.

Excluding energy prices, the 12-month change in the CPI edged up to 1.5% in August from 1.4% in July. Since June 2004, the increases of this index have ranged from 1.4% to 1.8%, suggesting that inflation has remained in check in the country.

The 12-month change in the all-items CPI excluding eight of the most volatile components identified by the Bank of Canada was 1.5% in August. With the exception of the 2.0% variation posted in May, this index has remained relatively stable over the last year, fluctuating between 1.5% and 1.7%.

The all-items CPI excluding eight of the most volatile components, combined with changes in indirect taxes, constitute the core inflation rate used by the Bank of Canada to define its inflation target.

On a monthly basis, prices paid by consumers continued their upward movement for a second consecutive month between July and August. The CPI rose 0.2% in August, largely as a result of pressures from the housing sector.

The all-items index excluding energy was also up 0.2% in August. This increase comes on the heels of declines of 0.2% recorded during the previous two months.

The same trend was observed for the all-items index excluding eight of the most volatile components identified by the Bank of Canada. The latter increased 0.2% between July and August, after dropping 0.2% during the previous two months.