Expectations were for a 1.4% increase in headline inflation, according to economists at.
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Prices were up in most major categories compared with a year earlier, with the cost of electricity, airfare and vehicles contributing the most to the overall inflation rate.
The closely-watched core rate, which strips out the price of some volatile items, fell to 1.8 percent from 2.1 percent, its lowest rate for two years.
However, those gains were offset by year-over-year price drops for gasoline, fuel oil and natural gas.
Alberta’s inflation rate was even lower than the national average at 0.7 unchanged from the previous month. Also, retail sales unexpectedly fell in July, causing investors to become risk-averse.
The data will increase expectations of some downside inflation risks and potentially lead to a Bank of Canada easing bias, although a rate cut still looks unlikely without significantly more evidence of falling inflation.
The July decline was registered the same month that the federal Liberal government distributed cheques to families under its revamped child benefit plan. Analysts had predicted sales would increase by 0.1 percent. Core retail sales, excluding automobiles, also fell by a seasonally adjusted 0.1 percent, against market expectations of 0.5 percent rise after a 0.6 percent drop the preceding month that was revised from the original decline of 0.8 percent.
Sales decreased in five of 11 subsectors while in volume terms, sales grew by 0.3 percent.
The report said gas station sales saw their first drop in four months with a three per cent decline in July.
Sales at furnishing and home furnishing stores decreased by 1.4 percent, while sales at clothing and clothing accessories stores rose by 1.6 percent.
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Across Canada, the numbers showed that retail sales fell in six provinces in July.
