The Consumer Price Index (CPI) increased 3.2% year over year in May, up from a 2.8% gain in April, reported Statistics Canada on Monday.
Higher prices for gasoline continued to drive the acceleration in the headline CPI in May. However, excluding gasoline, the CPI still rose at a faster pace year over year in May (+2.2%) compared with April (+2.0%), said the federal agency.
The CPI was up 1.0% month over month in May. On a seasonally adjusted monthly basis, the CPI increased 0.5%, largely due to a rise in the recreation, education and reading and transportation components, it added.
“On a year-over-year basis, gasoline prices rose at a faster pace in May (+33.2%) compared with April (+28.6%). Supply uncertainty stemming from the conflict in the Middle East, specifically the closure of the Strait of Hormuz, put upward pressure on gasoline prices for the third consecutive month. Consumers paid the highest prices for gasoline since June 2022, when Russia’s invasion of Ukraine created supply uncertainty,” said Statistics Canada.
Year over year, consumers paid more for travel tours in May (+0.7%) compared with April (-11.0%). On a year-over-year basis, prices for air transportation rose 7.4% in May, following a 1.7% decline in April. Airlines are experiencing higher operational costs, notably for jet fuel, it added.
“Prices for fresh fruit rose at a faster pace year over year in May (+5.3%) compared with April (-0.5%). The acceleration was mostly driven by berries and grapes. On a year-over-year basis, prices for fresh vegetables increased 9.0% in May, following a 4.1% rise in April. The upward movement was attributed to higher prices for broccoli, cauliflower, tomatoes and lettuce. Tomato prices rose 45.2% in May due to supply contractions in Mexico, stemming from poor weather and a reduction in planted acreage following the implementation of US tariffs,” said Statistics Canada.
“On a month-over-month basis, prices for fresh vegetables rose 5.5% in May following a decline of 3.9% in April. This is the largest monthly May increase since 2008 and is attributed to reduced supply and higher fuel costs. Collectively, higher prices for fresh fruit and fresh vegetables contributed to an acceleration in inflation for food purchased from stores, rising 4.3% year over year in May, the 16th consecutive month it has outpaced headline inflation on a year-over-year basis.
Leslie Preston, Managing Director & Senior Economist, TD, said: “Oil prices are down significantly since a tentative peace deal between Iran and the U.S. was reached, and gasoline prices have been following suit. We expect May to mark the peak for headline inflation this year. We expect May to mark the peak for headline inflation this year. As expected, we are seeing somewhat higher core inflation in recent months, but we don’t expect it to rise to a level that raises alarm bellow for the Bank of Canada.
“Apart from energy costs and some emerging tech price pressures inflation remains very well behaved in Canada, as a relatively soft demand backdrop leans against sellers raising prices. We expect this to keep the Bank of Canada on the sidelines for quiet some time. Bond markets yields are so far little moved by today’s numbers.”
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