Canada’s inflation rate moved higher in March, but with much of the increase seemingly tied to a sharp, war-driven spike in energy costs.
Statistics Canada reported Monday that its consumer price index rose 2.4% from a year earlier in March, up from 1.8% in February. On a monthly basis, prices climbed 0.9%, the largest monthly increase in 14 months, while seasonally adjusted inflation rose 0.5%.
The main driver was energy, particularly gasoline, as the conflict in the Middle East disrupted supply and pushed crude oil prices higher. Gasoline prices were up 5.9% from a year earlier and surged 21.2% from February, marking the largest monthly increase on record. Fuel oil and other fuels also posted a steep year-over-year increase of 26.1%, while natural gas prices fell 18.1%, helping to offset some of the broader energy rise.
Excluding gasoline, inflation actually slowed to 2.2% in March from 2.4% in February, suggesting the jump in headline inflation was concentrated at the pumps.
Food prices also continued to rise. Grocery prices increased 4.4% from a year earlier, up from 4.1% in February, with fresh vegetables leading the way. Vegetable prices rose 7.8%, the largest gain since August 2023, as tighter supplies and poor growing conditions in producing countries pushed up the cost of items such as cucumbers, peppers, and celery, StatsCan said.
At the same time, some categories showed slower price growth because of lingering comparisons tied to the temporary GST/HST break that ran from December 2024 through February 2025. Restaurant food prices rose 3.2%, much slower than the 7.8% increase recorded in February, while alcoholic beverages and hobby-related goods also helped ease some inflation pressure.
Economists said the report showed little evidence so far that the oil shock from the Iran war is broadly feeding into other prices. Analysts had expected an even larger increase, with forecasts calling for annual inflation of 2.6% and monthly inflation of 1.1%.
Ottawa’s new temporary break on federal fuel excise taxes, which began today, may also help cool pump prices in the months ahead.
