Canada's inflation slows in August

Canada's annual inflation rate dropped to 2.1 percent in August as falling gasoline prices offset strong advances in the housing sector, the federal government announced Tuesday.
The decline from a rate of 2.4 percent in July marked the first time in two years that the annual inflation rate had declined three consecutive months, said Statistics Canada, the government's statistical arm.
Gasoline prices, which had been soaring, slowed abruptly in midsummer, rising only 0.1 percent between July and August.
"During the summer 2006 vacation period, gasoline prices rose much less than they did last year," Statistics Canada said Tuesday. "While prices had shot up 10.8 per cent between June and August 2005, the increase during the same period in 2006 was only 4.7 per cent."
Factoring out energy prices, the core annual inflation rate, which excludes the most volatile commodities, was 1.5 percent in August, compared with 1.4 percent in July.
The core rate is most closely watched by the Bank of Canada when it sets interest rates.