Fuelled by a 26.9% one-year increase in prices Canadians paid at the gasoline pumps, the national annual inflation rate jumped to 3.1% in June, up from the 2.2% rate in May.

The jump in overall inflation was the biggest one-month increase since September 2005, Statistics Canada said today.

The one-year jump in gasoline prices was the largest since the 34.7% gain reported in September 2005, when hurricanes Katrina and Rita disrupted the oil market.

June’s increase in the cost of gasoline reflected recent increases in pump prices, but also that gasoline prices had been on the decline in June 2007, StatsCan said.

The Bank of Canada’s core index, which excludes several of the more volatile price factors and is used by the central bank to monitor the inflation control target, rose 1.5% in June 2008 from June 2007. That rate matched the annual increase seen in May.
Inflationary pressure

Gasoline wasn’t the only factor putting upward pressure on the inflation rate. StatsCan said mortgage interest cost, bakery products and air transportation also put strong upward pressure on the consumer price index in June.

Mortgage interest cost increased 9% year-over-year, as new housing prices continued to exert more upward pressure on this index than mortgage interest rates.

Homeowner’s replacement cost- – the cost of maintaining a housing structure — rose 3.2% in June, down from the 4% rate of growth posted in May. The 12-month increase observed in June was the smallest gain since March 2001.

Canadians paid 3% more on store-bought food compared with the same month of the previous year, a jump from the 1.9% increase reported for May. Prices for bakery products rose 12.3% year-over-year.

Air transportation costs were 14.3% higher, which was the biggest increase since May 2002. The increase was driven by premiums that carriers brought in to cover higher jet fuel costs.