07/22/2011 07:16 EDT | Updated 09/21/2011 05:12 EDT

Canada Inflation Drops To 3.1% Even As Food, Energy Costs Spike


THE CANADIAN PRESS -- OTTAWA - The annual inflation rate was 3.1 per cent in June, sliding from 3.7 per cent in May.

Statistics Canada said the drop from May was due to lower prices for passenger vehicles and hotel and motel rooms.

But higher prices for gasoline and food bought from stores kept inflation bubbling.

Food prices rose 4.8 per cent from June of 2010 and overall energy prices were 15.7 per cent higher than a year earlier.

The price of gasoline was 28.5 per cent higher on a year-over-year basis, although it actually dropped slightly compared with May.

Excluding volatile food and energy prices, inflation rose 1.4 per cent from June of 2010.

The inflation report came just days after the Bank of Canada said it would keep its key interest rate at one per cent.

The cost of transportation rose 7.0 per cent on an annual basis to June. In addition to higher gas prices, drivers paid 4.4 per cent more for insurance.

The cost of air travel was 7.6 per cent higher.

Manufacturers' discounts helped reduce the cost of passenger vehicles compared with a year earlier.

Food prices rose broadly on a year-to-year basis. Meat prices increased 5.9 per cent, while the cost of bread jumped 10.1 per cent and fresh vegetables cost 8.4 per cent more.

The cost of restaurant meals, however, rose by only 3.3 per cent.

Shelter costs rose 1.7 per cent from June 2010, with higher prices for fuel oil, electricity. However, mortgage interest costs slipped 1.9 per cent and natural gas was also cheaper.

Cable and satellite services cost 7.9 per cent more than in June 2010.

The pace of inflation slowed in every province compared with May. Nova Scotia had the fastest increase in consumer prices at 4.4 per cent, while Alberta had the slowest, at 2.1 per cent.