Canada inflation hits highest level since 2023 in May on gasoline surge

Canada’s annual inflation rate rose to its highest level in more than two years in May, driven mainly by a sharp increase in gasoline prices, official data showed Monday.

The consumer price index increased 3.2% year-on-year in May, up from 2.8% in April, Statistics Canada said.

The figure marked the highest annual inflation reading since December 2023 and came above market expectations of around 3%.

On a monthly basis, consumer prices rose 1% in May.

Gasoline prices were the main factor behind the acceleration, rising 33% from a year earlier as energy markets were affected by tensions in the Middle East.

Excluding gasoline, annual inflation stood at 2.2%, while inflation excluding food and energy rose to 1.6%.

The average of the Bank of Canada’s preferred core inflation measures, CPI-trim and CPI-median, was unchanged at 2.1%, suggesting that underlying price pressures remained more contained than the headline figure.

Air transportation prices also rose sharply in May, increasing 7.4% after falling 1.7% in April.

Food inflation accelerated to 3.8% from 3.5% in the previous month, partly due to higher prices for fresh fruit and vegetables.

Shelter inflation continued to ease, slowing to 1.7% year-on-year from 1.8% in April.

Statistics Canada data showed that price pressures became less broad-based, with 35% of goods and services in the consumer basket rising at or above an annual pace of 3% in May, down from 45% in December.

By province, inflation was 2.6% in Ontario, 3.6% in Quebec and 3.7% in Alberta.

Following the data, the Canadian dollar strengthened against the US dollar, while short-term government bond yields edged higher as investors assessed the outlook for Bank of Canada monetary policy.