The Consumer Price Index (CPI) in Canada rose 1.7% year over year in April, down from a 2.3% increase in March. The slowdown in April was driven by lower energy prices, which fell 12.7% following a 0.3% decline in March. Excluding energy, the CPI rose 2.9% in April, following a 2.5% increase in March, according to a Statistics Canada report released on Tuesday. Moderating the slowdown in the CPI in April were higher prices for travel tours (+6.7%) and food purchased from grocery stores (+3.8%).
On a monthly basis, the CPI fell 0.1% in April. On a seasonally adjusted monthly basis, the CPI was down 0.2%, said the federal agency.
Gasoline led the decline in consumer energy prices, falling 18.1% year over year in April, following a 1.6% decline in March. The price decrease in April was mainly driven by the removal of the consumer carbon price. Lower crude oil prices also contributed to the decline. Global oil demand decreased due to slowing international trade related to tariffs. In addition, supply from the Organization of the Petroleum Exporting Countries and its partners (OPEC+) increased, explained Statistics Canada.
Year over year, prices for natural gas fell 14.1% in April, after a 6.4% gain in March. The removal of the consumer carbon price contributed to the decline in April, it said.
In April, prices for food purchased from stores grew at a faster pace, increasing 3.8% year over year compared with 3.2% in March. Prices for food purchased from stores have been increasing at a faster rate than the all-items CPI for three consecutive months, said Statistics Canada
The largest contributors to the year-over-year acceleration in April were fresh vegetables (+3.7%), fresh or frozen beef (+16.2%), coffee and tea (+13.4%), sugar and confectionery (+8.6%) and other food preparations (+3.2%). Prices for food purchased from restaurants also rose at a faster rate in April, increasing 3.6% year over year, following a 3.2% gain in March, said the report.
Andrew Grantham, Senior Economist, CIBC Capital Markets, said headline inflation suddenly looks less taxing for the Bank of Canada, due to the elimination of the consumer carbon tax and the downward impact of that on gasoline prices, but some core measures remain a concern.
“Overall CPI fell by 0.1% in April (-0.2% SA) and the year-over-year pace decelerated to 1.7% from 2.3%. Gasoline prices were down 18% y/y, but that was partly offset by a slight reacceleration in food prices. Excluding food/energy, prices rose by 0.3% SA in April following a flat reading in the prior month, partly due to a rebound in travel tour prices following an unusually weak March,” he said.
“The Bank of Canada’s preferred core measures of inflation (including CPI-Trim, Median and CPI-X) all calculate price changes excluding the impact of indirect taxes and as a result weren’t directly impacted by the carbon tax removal. CPI-Trim and CPI-median both accelerated above 3% on a year-over-year basis (3.1% and 3.2% respectively), although we have shown in the past that these measures can be impacted by broad changes in food prices given their heavy weight in the overall basket.
“Signs of renewed weakening in the economy on one hand, as shown by the latest employment data, but stronger core inflation on the other makes for a tough decision for the Bank of Canada at its early June meeting.”
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