Headline inflation ticked slightly higher in May, with prices for food purchased from stores adding to the increase.
Statistics Canada’s consumer price index was up 2.9% on a year-over-year basis last month, topping the 2.7% gain in April and defying economist expectations for a decline that might open the door to another Bank of Canada interest rate reduction.
StatsCan mostly attributed the increase in the May inflation rate to higher prices for services which rose 4.6% in May following a 4.2% increase in April. But food prices were up as well, rising 1.5% on a year-over-year basis in May following a 1.4% increase in April.
“Although slight, this was the first acceleration since June 2023,” StatsCan said of grocery prices. “Prices for groceries remain elevated and have increased by 22.5% compared with May 2020.”
The May increase was driven by higher month-over-month prices for fresh vegetables (+3.5%), meat (+1.3%), fresh fruit (+2.2%) and non-alcoholic beverages (+2.4%). The monthly increase in meat prices was largely a result of higher prices for fresh or frozen beef, amid high demand and tight supply, StatsCan said.
On a month-over-month basis, grocery prices rose 1.1% in May 2024 - seasonally typical, but still the largest since January 2023.
The Bank of Canada earlier this month cut its key overnight lending rate by 25 basis points to 4.75%, citing progress in wrestling headline inflation down to its preferred target of 2%.
But with May inflation creeping higher again, the June inflation data will be closely watched as the Bank is set to deliver its next rate announcement on July 24.
