08/23/2013 11:12 EDT | Updated 10/23/2013 05:12 EDT

Canada's July inflation 1.3% as gas prices jump

Canadians are paying more for shelter and much more for gasoline than they did last year, putting the inflation rate for July at 1.3 per cent.

The biggest increase was in the cost of gasoline, up 6.1 per cent from the previous year, with consumers in every province feeling the pain at the pumps.

That helped push transportation costs 2.7 per cent higher, though higher prices for cars also contributed to that increase. Statistics Canada estimates prices to buy passenger vehicles rose two per cent in the year.

There was good news on the cost of food, which rose only a modest 0.8 per cent, the smallest year-over-year increase in more than three years.

But shelter costs rose 1.3 per cent, as rents and the cost of natural gas went up.

The 1.3 per cent inflation rate in July, followed a 1.2 per cent increase in the consumer price index in June and is considered historically low. The Bank of Canada has said it wants to keep Canadian inflation below 2.0 per cent a year.

In a research note released this morning, RBC Economics said it expects inflation to drift gradually higher in the near term as Canada is showing signs of “economic growth that will gradually absorb remaining excess slack in the economy.”

As a result of the modest inflation numbers expected for the next year, RBC expects the Bank of Canada will keep its prime rate low well into 2014. The prime rate has not changed, despite higher mortgage rates announced earlier this week.

"We look for the bank to raise the overnight rate in the second half of 2014 when the economy is closer to full capacity and both the headline and core inflation rates are approaching the two per cent target," the research note said.

Consumer prices rose in nine provinces in the 12 months to July with the largest increase in Manitoba, which saw higher cigarette taxes. British Columbia had no overall inflation.

The inflation rate by province:

- Newfoundland and Labrador: 2.0%.

- Prince Edward Island: 2.3%.

- Nova Scotia: 1.5%.

- New Brunswick: 1.0%.

- Quebec: 1.1%.

- Ontario: 1.6%.

- Manitoba: 3.0%.

- Saskatchewan: 1.6%.

- Alberta: 2.2%.

- British Columbia: 0%.