Statistics Canada said increases in the price of passenger vehicles, electricity, food, and homeowners' replacement costs were mostly responsible for June's slightly higher rate, which was up three-tenths of a point from May.
Economists had actually projected an even greater uptick given May's extremely low reading of 1.2 per cent.
But they also cautioned that most of the increase would be temporary, caused by unusual base-effects from a year earlier when gas prices were receding and auto dealers launched an aggressive program of discounting.
The agency noted that discounting occurred this June as well — with car prices 2.7 per cent lower than they were a month earlier — but less so than happened a year earlier.
As well, gasoline prices continued to trend downwards this June by 3.2 per cent from May, but not as sharply as occurred last year at this time.
A truer picture of the inflation trend was reflected in the monthly measure, which saw the overall price of consumer goods and services Canadians regularly purchase fall by 0.4 per cent from May.
"Despite the many moving parts and all the dire headlines on food and energy, Canadian inflation remains remarkably stable, and one of the least of our economic concerns," said Doug Porter, deputy chief economist with BMO Capital Markets.
Porter noted that food prices could become a concern down the road. A severe drought in the U.S. has sent corn and soybean prices to record highs and put upward pressure on wheat.
"It's a North American market for a lot of food prices, so that will find its way into the Canadian basket as well," he explained. "In the past we've found the lag could be as long as nine months, so this could become a big issue around the turn of the year."
Earlier in the week, the Bank of Canada said it expects overall headline inflation to remain below its two per cent target for about a year.
The central bank's other measure — core inflation, which excludes volatile items like energy and fresh vegetables and fruit — bore monitoring as it rose two-tenths to two per cent, but still dead on the bank's target line.
Analysts doubted bank governor Mark Carney would spend many sleepless nights worrying about inflation, even core. Dismal global growth should keep any inflation pressures at a safe setting for some time, despite record low interest rates designed to pump up spending.
"With core inflation likely to continue hovering around the two per cent target given that the economy is operating close to potential, and new mortgage-lending rules expected to help cool down the housing market and household debt growth, the Bank of Canada is not feeling much pressure to alter the overnight rate," said Dina Ignjatovic, an economist with TD Bank.
"We expect the bank to remain on hold until March 2013."
This week, Carney kept the overnight rate at one per cent for the 15th consecutive policy meeting dating back to September 2010, although he surprisingly kept the "bias" toward hiking rather than cutting interest rates in the future.
The key stand-out in Friday's report was that the cost of electricity rose by 5.9 per cent from last year, with most of the increases in Ontario, Alberta and British Columbia. But the agency noted that even with this sharp increase, the energy component declined 0.8 per cent in the 12 months, following a decrease in May.
In fact, for the second consecutive month, energy costs acted as a drag on annual inflation, which had not been the case since October 2009. Excluding that segment, the overall consumer price index would have risen to 1.7 per cent in June, the agency said.
On an annual basis, food rose two per cent, transportation costs by 1.7 per cent and shelter costs increased 1.3 per cent.
On a monthly basis, natural gas, fresh vegetables, financial services, electricity and hotel accommodation all cost more than in May. But cars, clothing, gas, non-alcoholic beverages and mortgage interest charges cost less.
Regionally, there were no price hot-spots as the inflation rate ranged from a high of 2.2 per cent in Newfoundland and Labrador, to a low of 1.2 per cent in Ontario.
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