Canada’s annual inflation rate reached 3.2% in May, its highest reading since late 2023, surprising analysts who had forecast a rise to three per cent from 2.8% in April, according to Reuters polling.
Fuel costs were once again the dominant factor, with gasoline prices posting a 33.2% year-over-year gain in May, steeper than the 28.6% recorded in April. An oil shortage tied to the war in Iran has kept fuel costs elevated across several consecutive months.
Fresh produce also pushed prices sharply higher. Tomato prices climbed 45.2% year over year, a result Statistics Canada linked to poor weather and reduced planting in Mexico. Across all fresh vegetables, prices rose nine percent, and the month-over-month jump of 5.5% was the steepest since 2008. Fresh fruit was up 5.3% from a year earlier. Combined, these pressures lifted overall food inflation to 4.3% on an annual basis in May.
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Underlying price growth also accelerated. Excluding gasoline, the consumer price index rose 2.2% in May, up from 2% in April, with food, recreation, and alcoholic beverages among the main contributors. Computer equipment was another bright spot for inflation, with prices for hardware, software, and supplies climbing 3.9% as strong demand from artificial intelligence data centres tightened supply of RAM and solid-state drives.
Some categories moved in the other direction. Shelter costs expanded at a modest 1.7% year over year, helping to cushion gains elsewhere, while passenger vehicle prices and household equipment costs also grew more slowly.
Core inflation measures, which exclude volatile components, held close to the Bank of Canada’s two per cent target.
