Inflation jumps to 3.2% in May thanks to higher gas prices: StatCan
The annual rate of inflation jumped to 3.2% in May, up from 2.8% in April and topping most economists’ expectations.
StatCan said gas prices rose 33.2% year-over-year last month as conflict in the Middle East continued to shutter the Strait of Hormuz to oil tankers. The agency said last month marks the most consumers have paid for gasoline since June 2022, when Russia’s invasion of Ukraine drove supply uncertainty.
Prices at the pumps have fallen in recent weeks as peace talks between the United States and Iran progressed.
Higher costs for jet fuel – also driven by the war but not captured in StatCan’s April inflation data – showed up in May. Air transportation costs were up 7.4% annually last month after decreasing slightly in April.
Inflation also accelerated at the grocery store, rising half a percentage point to 4.3% annually. StatCan said grocery inflation has now outpaced the headline rate for 16 straight months.
The agency pointed to rising prices for fresh fruit and vegetables as driving the increase. StatCan said fresh vegetables rose 5.5% in May – the largest monthly May increase since 2008 – due to reduced supply and higher fuel costs.
Tomato prices rose a whopping 45.2% annually in May, which StatCan attributed to tough growing conditions in Mexico. U.S. tariffs also meant Mexican growers planted less acreage, StatCan said, contributing to supply constraints.
Prices for computer equipment, software and supplies, meanwhile, rose 3.9% in May. Demand from artificial intelligence data centres has put a supply crunch on key computer inputs, StatCan said.
Offsetting the price hikes in May were ongoing declines in shelter inflation, which edged lower to 1.7% year-over-year last month. Prices were also growing at a slower pace for passenger vehicles, tools and other household equipment.
The May inflation report will be the Bank of Canada’s last look at price data before its next interest rate decision on July 15.
