After Canadians saw interest rates increase last week, Statistics Canada is reporting Canada’s inflation in June was 2.8 per cent — closing in on the 2 per cent target the Bank of Canada has its sights on.
The agency’s consumer price index report noted that the deceleration was broad-based but lower gasoline prices, compared to a year ago, led the slowdown.
That said, grocery prices are still much higher. Prices rose 9.1 per cent year-over-year in June, which was slightly faster than in May. That month, inflation was 3.4 per cent.
Interest rates were raised because the bank expected inflation to stay above its target until mid-2025. It hopes higher interest rates would reduce consumer spending, bringing inflation down.
Interest rates are of particular interest to the automotive industry as a whole, including the aftermarket. Higher rates make new vehicles more expensive, inflating the gap when consumers debate repairing or replacing their vehicle.
“This is very important for new car sales, because of the fact that we’re heavily dependent upon credit,” Vildozo said of lower interest rates at AIA Canada’s National Conference recently.
So long as interest rates are elevated, consumers will likely opt for repair, continuing to boost aftermarket business.
“This is great news if you’re in the aftermarket businesses because it means a lot of people are going to be holding on to their vehicles for much longer. So enjoy it and make sure you jack up your prices now,” Vildozo said.
Whether or not this changes the central bank’s plans to lower interest rates remains to be seen.