Canada’s annual inflation rate in May accelerated more than expected to 3.2%, a 29-month high, data showed today, as the impact of higher crude oil prices due to the Iran conflict continued to filter down to gasoline costs.
Analysts polled by Reuters had estimated the annual inflation rate to touch 3% in May, up from 2.8% in April.
The prices, however, are already showing a major reversal in June after an interim peace deal was signed between the US and Iran last week, which, analysts have said, could help ease the headline number in June.
Statistics Canada said excluding the impact of gasoline prices, the consumer price index still posted a higher increase of 2.2% in May from 2% in April led by elevated cost of food, recreation and alcoholic beverages.
The monthly inflation rate rose to 1% in May, exceeding expectations of 0.8% rise. This is the highest monthly rise in15 months.
Gasoline prices in May rose by 33.2% on a year-over-year basis. Consumers in May shelled out more for gasoline than from its previous peak four years ago when Russia invaded Ukraine, StatsCan said.
This led to an increase in the cost of transportation, which accounts for almost 18.5% of the CPI basket, posting a 9% annual increase last month.
The inflation number is not likely to alter Bank of Canada’s assessment of underlying inflation as it said earlier this month that it was seeing limited evidence higher energy prices were fueling broad-based inflation.
The cost of food, which also contributes around 17% of the CPI basket, rose 3.8% in May from 3.5% in April, StatsCan said, adding that this was fueled by an increase in prices of fresh fruits and vegetables which rose by 5.3% and 9% respectively in May.
The impact of higher transportation and food prices were largely offset by shelter costs, the biggest contributor to the CPI basket at close to 30%. Shelter costs rose by 1.7% in May following a 1.8% increase in April, data showed, mainly led by a reduction in mortgage costs which shrunk by 0.2% last month.
