OTTAWA (CP) -- Canada's inflation rate rose in July to its highest in more than five years, as the price of gasoline soared 28.6 percent nationally compared with the same time last year.
Statistics Canada says the annual inflation rate rose to 3.4 percent in July from 3.1 percent in June.
With gasoline out of the mix, consumer prices rose 2.1 percent in July. The Bank of Canada's core inflation rate, which ignores the most volatile items, such as food and energy prices and also factors out changes in indirect taxes, rose 1.5 percent in July.
Economist David Porter of BMO Capital Markets said the data suggest Canada is still in better shape than many other countries.
"While headline inflation is now running at its fastest pace in more than five years, it is still near the bottom of the pack globally -- and more than two points below the current U.S. pace," Porter said.
However, he saw no reason to expect any drop in inflation -- especially since the rates in the second half of 2007 were muted by the sharp rise of the Canadian dollar from August to a record high in mid-November of that year.
"Look for the headline readings to hang around three percent for some time yet, while core looks poised to grind higher as the loonie-at-par discounts begin to fade out of the calculation later this year."
The overall inflation rate announced Thursday was also pushed by natural gas prices, which rose 25 percent between July 2007 and last month.
Food prices were up 4.3 percent in July, led by a 13.2-per-cent jump in the bakery section.
Rising world prices for grain were the main influence there.
Lower prices for autos and cheaper car leases helped ease the impact of the other increases.
Prices for computer equipment and supplies dropped 12 percent in July, and the costs of video equipment and photography equipment and supplies were also lower.
The mortgage interest cost index rose 8.5 percent between July 2007 and last month. That was lower than the 9.0 percent increase recorded in June, but the easing was due mainly to lower house prices, not lower mortgage rates.
Gasoline prices were painfully high across the country. Drivers in British Columbia faced the sharpest sting, with prices up 31.5 percent, but Ontario and Quebec also saw jumps of more than 30 percent.
Overall, Prince Edward Island saw the steepest jump in inflation, with prices up 5.3 percent. Newfoundland and Labrador and Nova Scotia were just behind with a 4.2-percent increase.