The Consumer Price Index (CPI) in Canada increased by 1.9% year over year in January 2025, following a 1.8% rise in December, according to new data released Tuesday by Statistics Canada. Excluding gasoline, the CPI climbed 1.7%.
Energy Costs Push CPI Higher
A key driver behind the January inflation increase was rising energy prices, particularly gasoline and natural gas. Gasoline prices surged 8.6% year over year, more than doubling December’s 3.5% increase. Manitoba saw the largest jump at 25.9%, following the reintroduction of the provincial gas tax at a lower rate after a one-year suspension. Meanwhile, natural gas prices rebounded, rising 4.8% year over year in January after declining 5.5% in December, explained the federal agency.
Food Prices Decline for the First Time Since 2017
Despite inflationary pressures in the energy sector, food prices provided some relief for consumers. The food component of the CPI dropped by 0.6% in January, marking the first annual decline since May 2017. Restaurant food prices plummeted by 5.1%, the steepest drop on record, more than tripling December’s 1.6% decrease. The decline is largely attributed to the goods and services tax (GST)/harmonized sales tax (HST) exemption introduced in December, said Statistics Canada.
Automotive Sector Sees Mixed Trends
The report said the purchase of passenger vehicles index posted a 0.4% increase in January, marking the first yearly gain in eight months. New vehicle prices rose 2.3% year over year, accelerating from a 0.9% increase in December. However, used vehicle prices continued their downward trend, falling 3.4% year over year—though at a slower rate compared to December’s 4.1% drop. This marks the 13th consecutive month of declining used vehicle prices.
GST/HST Tax Break Continues to Influence Prices
The GST/HST tax exemption, introduced in December 2024, continued to exert downward pressure on select price indexes. In addition to restaurant food prices, alcoholic beverages purchased from stores saw a 3.6% decline year over year in January, following a 1.3% drop in December. Toys, games (excluding video games), and hobby supplies also saw prices fall by 6.8% in January, following a 7.2% decline the previous month, added Statistics Canada.
The tax exemption, which applies to approximately 10% of the all-items CPI basket, remains in effect until February 15, 2025, suggesting continued impacts on the February CPI data, it said.
