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.
Nice. And the basket weights used are definitely representative of an average household with food being only 3x more important than alcoholic beverages, and housing being only twice as important as food. Methodology is genius.
And Like EVERYTHING In Life, It’s THE PEOPLE’S FAULT! But, They’re Children Pointing Fingers. So, It Will Get Worse. LOL!
Great report, Stephen. The replacement cost of depreciation component doesn’t get much attention now that we are in a housing slump rather than a housing boom. One odd thing though that hasn’t been discussed at all, to my knowledge, is the long number of months with no change for St. John’s, Newfoundland (13 months, May 2025 to May 2026), Prince Edward Island (11 months, July 25 to May 2026) and New Brunswick (17 months, January 2025 to May 2026). For New Brunswick, the evidence of the Teranet National Bank House Price Indexes shows that this constancy is clearly ridiculous. Its index for Moncton, the most important urban centre in New Brunswick, shows a decline in the seasonally adjusted series of 6.1% from February 2026 to May 2026.
The CPI for replacement cost is based on the dwelling only part of the new housing price index. In theory, this is a better indicator than a resale index like the Teranet National Bank HPI, but it Is in trouble if housebuilding slumps so much that a viable sample of builders cannot be found. It is notable that the housing depreciation component of the UK Retail Prices Index relies on a housing price index for existing homes, and not on the guesstimates of builders of new homes about what the dwelling portion of each home would sell for.