The Consumer Price Index (CPI) rose 2.9% on a year-over-year basis in May, up from a 2.7% gain in April. Acceleration in the headline CPI was largely due to higher prices for services, which rose 4.6% in May following a 4.2% increase in April. Faster price growth for services was led by cellular services, travel tours, rent and air transportation. Prices for goods (+1.0%) grew at the same rate as in April, said Statistics Canada in a report released on Tuesday.
Oleksandr P
On a monthly basis, the CPI rose 0.6% in May, largely stemming from an increase in travel tours. On a seasonally adjusted monthly basis, the CPI rose 0.3% in May, added the federal agency.
“Prices for food purchased from stores rose 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. Prices for groceries remain elevated and have increased by 22.5% compared with May 2020,” it said.
“On a month-over-month basis, grocery prices rose 1.1% in May 2024. While this monthly increase is seasonally typical, it is the largest since January 2023. The monthly increase in May 2024 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.”
Katherine Judge
Doug Porter, Chief Economist with BMO Capital Markets, said: “No bones about it, this is not what the Bank of Canada wanted to see at this point, and clearly shaves the odds of a follow-up July rate cut. However, it doesn’t rule out such a move, as we will see one more CPI (next one is July 16, eight days before the July 24 rate decision). With inflation back on a bumpy path, the outlook for BoC moves is similarly bumpy. For now, our official call remains that the next BoC rate cut will be in September, and this report does nothing to move that needle.”
James Orlando, Director of Economics at TD Bank, said while this wasn’t as big of a letdown as the Oilers’ game last night, today’s CPI print was a disappointment.
“Not only did the headline print unexpectedly rise, the average of the BoC’s core inflation rates increased for the first time in 2024! This was driven by big price swings in a number of services categories. Big increases were seen in areas related to housing and travel – two sources of unrelenting price pressures over the last year,” he said.
“Today’s report won’t instill any added confidence for the Bank of Canada. The central bank cut interest rates in early-June because it gained sufficient conviction that it had inflation under control. Just yesterday, Governor Macklem said in a speech, “since January, inflation has been below 3%, and our measures of underlying inflation have eased steadily. This has increased our confidence that inflation will continue to move closer to the 2% target this year.” Now, one bad inflation print doesn’t make a trend, and inflation remained below 3%. But it does speak to the unevenness of the path back to 2%. For this reason, we think the BoC will likely pause at its July meeting, before cutting rates again in September.”
Mario Toneguzzi
Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list. He was also named by RETHINK to its global list of Top Retail Experts 2024.
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