Canadians are paying a lot more across the board. Statistics Canada (StatCan) data shows the Consumer Price Index (CPI) accelerated to a multi-year high in May. Gasoline is a major driver, but with half of the basket’s major components accelerating simultaneously, the problem is much broader than one commodity.
Canadian Inflation Accelerates To Highest Level Since 2023
Canadian Consumer Price Index (CPI): Annual growth rate.
Source: StatCan; Better Dwelling.
Annual CPI growth accelerated to 3.2% in May, adding 0.4 points in the month and hitting a 29-month high. CPI excluding gasoline was a more modest 2.2%, though it still accelerated by 0.2 points. Gas is a major driver of the recent acceleration, but let’s circle back to that in a moment.
Canadian Inflation Accelerated In Half of CPI’s 8 Components
Canadian CPI: Annual growth by component.
Source: StatCan.
CPI’s acceleration is broad—not isolated to a crude-driven shock. StatCan notes that half of the 8 major components accelerated in May, and transportation (+9.0%) has surged over 4x the Bank of Canada’s (BoC) target rate.
The BoC’s preferred core inflation measures are also moving in the wrong direction. CPI-common accelerated 0.2 points to 2.7% in May, approaching the 3.0% upper bound. The other two—CPI-median (+2.1%) and CPI-trim (+2.0%)—were both unchanged. These measures strip headline volatility, and while they don’t signal a crisis, neither is falling.
Gas, Rent, and Property Taxes Among Biggest Drivers of Inflation
The biggest contributor to CPI’s surge is no surprise—gasoline prices. Annual growth of gasoline prices climbed to 33.2% in May, beating the already massive 28.6% reported in April. StatCan attributed the pressure to supply uncertainty from the Strait of Hormuz closure—now in its third consecutive month of impact. It’s unclear what’s happening in there. Was there a tsunami or something? StatCan didn’t elaborate.
Gasoline wasn’t the only surging category. Rounding out the top contributors to annual growth were rent (+3.5%), food purchased from restaurants (+3.1%), passenger vehicles (+2.5%), and property taxes and other special charges (+5.6%).
Moderating CPI’s annual growth are homeowners’ replacement costs (-2.5%), household appliances (-5.7%), other owned accommodation expenses (-2.1%), natural gas (-4.2%), and travel tours (+0.7%—positive, but a smaller contributor than last year). The pullback in housing-related costs reflects both mean reversion after the pandemic surge and softening demand in recent months.
The breadth of this acceleration is the real story. It’s easy to blame gas and tell consumers to wait it out. When half of CPI’s major components move in the same direction, and the BoC’s own core measures drift towards its upper bound, that isn’t a convincing narrative. Households have seen a simultaneous sharp uptick in the cost of shelter, food, and transportation. That’s not a crude shock, nor does it align with the job market erosion and slowing GDP data.
