Consumer prices increased 1.5% year-over-year in May, slightly slower than the 1.7% growth seen the month before, according to Statistics Canada data released June 17.
In May on its own, prices rose 0.4%, with almost all items seeing an increase in the month. Core inflation increased 0.2% in May and 2.1% year-over-year, after a 2.2% increase in April.
Douglas Porter, chief economist at BMO Financial Group, said a strengthening Canadian dollar is part of the reason for the slowdown in inflation.
“The spring-time recovery in the loonie has helped dampen Canada’s inflation rate, notably in the grocery aisles,” Porter said.
“Even so, Canada is still running one of the fastest headline inflation rates in the industrialized world—albeit below target at 1.5%—and core inflation shows little sign of backing down below 2% anytime soon.
“In other words, there’s nothing here to move the needle for the Bank of Canada.”
The price of food decreased 0.5% in May and increased 1.4% year-over-year, which is down more than three percentage points from its peak of 4.6% in January.
“Just as an example of how quick the turn has been, fresh veggies have gone from increases of more than 18% early this year to less than 2% now,” Porter said.
Gas prices decreased 7.1% year-over-year after falling 5.8% in April. On a monthly basis, however, gas has seen its third consecutive monthly increase with a 4.1% rise in May, which follows a gain of 8.9% in April.
Recreation, education and reading increased 1.6% in the 12 months to May after increasing 2.4% in April. Prices for clothing and shoes increased 1.1%, which was the first rise in this category in five months.
The Canadian dollar rose more than three-tenths of a cent after the data was released. As of press time, the loonie was trading at 77.65 cents U.S.
@EmmaHampelBIV
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