The Consumer Price Index (CPI) increased 2.8% year over year in April, up from an increase of 2.4% in March, reported Statistics Canada on Tuesday.
Higher energy prices, most notably gasoline prices, drove the acceleration in the headline CPI. The removal of the consumer carbon levy in April 2025, which resulted in monthly declines for gasoline and natural gas, has now fallen out of the 12-month movement, putting upward pressure on the all-items CPI. Excluding gasoline, the CPI rose at a slower pace year over year in April (+2.0%) compared with March (+2.2%), explained the federal agency.
Moderating faster price growth in the all-items CPI was a year-over-year decline in prices for travel tours and a slowdown in rent prices. The CPI was up 0.4% month over month in April. On a seasonally adjusted monthly basis, the CPI increased 0.3%, it said.
“In April, energy prices rose 19.2% year over year, following a 3.9% increase in March. Gasoline prices continued to increase year over year in April, rising sharply by 28.6% after a 5.9% gain in March. The removal of the consumer carbon levy on April 1, 2025, resulted in a monthly price decline in that month, which put upward pressure on the year-over-year gasoline movement in April 2026. In addition to the accelerating base-year effect, prices were pushed higher by supply uncertainty (caused by the conflict in the Middle East), as well as by the switch to the more expensive summer blend. Moderating the increase was the temporary suspension of the federal fuel excise tax that went into effect on April 20,” explained Statistics Canada.
“Similarly, prices for fuel oil and other fuels increased 41.3% year over year in April, amid higher oil prices linked to the conflict in the Middle East. A smaller year-over-year decline in prices for natural gas in April (-2.4%) compared with March (-18.1%) also contributed upward pressure to energy prices. Natural gas prices were impacted by the removal of the consumer carbon levy in April 2025.”
After declining 0.4% year over year in March, prices for clothing and footwear rose 2.0% in April. The increase was led by higher prices for clothing, in particular women’s clothing (+1.4%). Prices for men’s clothing also contributed to the acceleration, falling less in April (-1.2%) compared with March (-2.9%), noted Statistics Canada.
“As expected, higher oil prices lifted Canadian inflation in April, but we are not yet seeing much of a knock-on effect to non-energy related goods or services. Core inflation pressures were actually softer than expected in April. There is little argument yet for Bank of Canada rate hikes here, and market pricing for rate hikes this year has come down a bit this morning,” said Leslie Preston, Senior Economist, TD Economics.
“Oil prices have remained high in May, so energy prices are likely to keep headline inflation elevated for some time. Given a generally soft economic backdrop in Canada, we expect the effect on core prices should be more modest. Core inflation is expected to stay reasonably close to the 2% target on a year-on-year basis this year (see details in today’s report).”
Doug Porter, Chief Economist, BMO Capital Markets, said: “Looking beyond the nasty business at the gasoline pumps, this report is unambiguously soft. It appears that the sizeable and growing output gap is prompting ongoing disinflationary pressure in many other sectors. The risk is that still-rising energy prices disrupt that calming trend over the next few months. However, near-term Bank of Canada rate-hike speculation—which has ratcheted up in recent weeks—should calm on this friendly report. This cool core inflation backdrop reinforces our bias that rate hikes would be a big mistake in the current Canadian economic landscape. Still, the reality is that as long as oil prices continue to grind higher, the rate-hike chatter will remain.”
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