Canada’s annual inflation rate accelerated more than expected in May, as sharply higher gasoline, travel, and grocery prices pushed the Consumer Price Index to its highest level in more than two years.
Statistics Canada reported Monday that the CPI rose 3.2% year over year, up from 2.8% in April and above economists’ expectations for a 3% increase. Consumer prices advanced 1% from April, while the seasonally adjusted monthly increase was 0.5%.
Gasoline remained the primary driver, with prices jumping 33.2% from a year earlier, compared with a 28.6% increase in April. Supply uncertainty related to the Middle East conflict and the closure of the Strait of Hormuz pushed pump prices to their highest level since June 2022, StatsCan said.
However, crude oil prices have fallen sharply in the days since the U.S. and Iran signed an interim peace agreement, easing concerns about supply disruptions and potentially reducing inflationary pressure in the months ahead.
Inflation also strengthened beyond energy. Excluding gasoline, consumer prices rose 2.2% from a year earlier, up from 2% in April.
Food purchased from stores increased 4.3%, marking the 16th consecutive month in which grocery inflation exceeded the headline rate. Fresh fruit prices climbed 5.3%, while fresh vegetables rose 9%. Tomato prices soared 45.2% amid poor weather, reduced Mexican acreage and disruptions linked to U.S. tariffs.
Travel costs also increased. Airfares rose 7.4% from a year earlier after declining in April, while travel-tour prices edged 0.7% higher. Airlines have faced increased operating expenses, particularly for jet fuel.
Shelter inflation continued to ease, rising 1.7% after a 1.8% increase in April. Rent inflation slowed to 3.5%, its weakest pace since January 2022, while mortgage interest costs declined for the 33rd consecutive month on a year-over-year basis.
Still, the stronger headline reading is unlikely to significantly change the Bank of Canada’s assessment of underlying inflation, reports said. The central bank has said there is limited evidence that elevated energy costs are spreading broadly throughout the economy.
