Rising gasoline, air travel and grocery costs push annual inflation above 3% for the first time since 2023
Canada’s annual inflation rate accelerated to 3.2 percent in May, driven by a third straight month of rising fuel costs linked to the US-Iran war and ongoing disruption to oil flows through the Strait of Hormuz, according to data released by Statistics Canada.
The figure rose from 2.8 percent in April and came in above most economists’ expectations. Statistics Canada said gasoline prices jumped 33.2 percent year-on-year in May, marking the highest pump prices since June 2022, when Russia’s invasion of Ukraine rattled global energy markets. Although fuel prices have eased in recent weeks as US-Iran peace talks progressed, the May data captured the earlier impact of supply fears and shipping disruption in the Gulf.
Higher energy costs also fed into airfares, with air transportation prices rising 7.4 percent annually in May after a slight decline the previous month. Statistics Canada said the increase reflected higher jet fuel costs that were not fully visible in April’s inflation figures.
Grocery inflation speeds up as produce prices jump
Food prices also remained a major source of pressure for households. Grocery inflation rose to 4.3 percent year-on-year in May, up half a percentage point from April and marking the 16th straight month in which grocery costs outpaced headline inflation.
Statistics Canada said fresh fruit and vegetable prices were a key driver. Fresh vegetables rose 5.5 percent in May, the largest increase for that month since 2008. Tomato prices surged 45.2 percent compared with a year earlier, reflecting poor growing conditions in Mexico and lower planting caused by US tariffs.
Shelter costs ease but rate decision looms
Other inflation pressures came from computer equipment, software and supplies, which rose 3.9 percent annually amid supply constraints linked to demand from artificial intelligence data centres.
However, some categories offered relief. Shelter inflation slowed to 1.7 percent, while passenger vehicles, tools and household equipment posted softer price growth.
The May inflation report will be the Bank of Canada’s final major price reading before its next interest rate decision on July 15.
