Monday, July 4, 2022
HomeCANADACanada's Inflation Rate Stands At 7.7%, Highest Point Since 1983

Canada’s Inflation Rate Stands At 7.7%, Highest Point Since 1983

Canadians continued to feel the impact of rising prices in May as consumer inflation rose 7.7% year over year. This was the largest yearly increase since January 1983 and up from a 6.8% gain in April.

Excluding gasoline, the CPI rose 6.3% year over year in May, after a 5.8% increase in April. Price pressures continued to be broad-based, pinching the pocketbooks of Canadians and in some cases affecting their ability to meet day-to-day expenses.

The acceleration in May was largely due to higher prices for gasoline, which rose 12.0% compared with April 2022 (-0.7%). Higher prices for services, such as hotels and restaurants, also contributed to the increase. Food prices and shelter costs remained elevated in May as price growth was unchanged on a year-over-year basis.

On a monthly basis, the CPI rose 1.4% in May, following a 0.6% increase in April. On a seasonally adjusted monthly basis, the CPI was up 1.1%, the fastest pace since the introduction of the series in 1992.

Wage data from the Labour Force Survey found that average hourly wages rose 3.9% year over year in May, meaning that, on average, prices rose faster than wages in the previous 12 months. However, understanding the dynamics of wage changes—and their relationship to rising consumer prices—requires a range of indicators above and beyond average hourly wages. For more information on a range of wage indicators, see the release “Disaggregating wage growth: Trends and considerations.”

Chart 1 
12-month change in the Consumer Price Index (CPI) and CPI excluding gasoline

Chart 1: 12-month change in the Consumer Price Index (CPI) and CPI excluding gasoline

Chart 2 
Prices increase at a faster pace in five major components

Chart 2: Prices increase at a faster pace in five major components

Energy prices increase on supply uncertainty and higher demand

Energy prices rose 34.8% on a year-over-year basis in May, driven primarily by the largest one-month price increase since January 2003. Compared with May 2021, consumers paid 48.0% more for gasoline in May, stemming from high crude oil prices, which also resulted in higher prices for fuel oil and other fuels (+95.1%).

On a month-over-month basis, gasoline prices increased 12.0% in May, after a 0.7% decline in April. This was the largest monthly increase since May 2020, when oil prices began to recover following major price declines in the early stages of the COVID-19 pandemic in March and April 2020.

Crude oil prices rose in May as a result of supply uncertainty amid Russia’s invasion of Ukraine, as well as higher demand as travel continued to grow in response to eased COVID-19 restrictions.

Chart 3 
Energy prices increase in May

Chart 3: Energy prices increase in May

Prices for groceries remain elevated

Grocery prices remained elevated in May as prices for food purchased from stores rose 9.7%, matching the gain in April. With price increases across nearly all food products, Canadians reported food as the area in which they were most affected by rising prices. Supply chain disruptions, as well as higher transportation and input costs, continued to put upward pressure on prices.

Edible fats and oils (+30.0%) recorded its largest increase on record, mainly driven by higher prices for cooking oils.

Fresh vegetable prices increased 10.3% in May, following an 8.2% gain in April. Prices for other fresh vegetables, including onions, peppers and carrots, contributed the most, rising 10.2% on a year-over-year basis.

Prices for fresh or frozen fish rose 11.7% year over year in May. Increased input costs and the recent introduction of tariffs amid Russia’s invasion of Ukraine pushed prices higher.

Meat prices increased at a slower pace in May (+9.0%) compared with April (+10.1%), moderating the food purchased from stores index.

Chart 4 
Prices for food purchased from stores remain elevated

Chart 4: Prices for food purchased from stores remain elevated

Introduction of used vehicle prices

With the introduction of used vehicle prices in the calculation of the May CPI, two new series have been published: purchase of new passenger vehicles (2022-04=100) and purchase of used passenger vehicles (2022-04=100). Both price index series are available starting April 2022 and are published at the national level.

On a month-over-month basis, purchase of new passenger vehicles rose 0.1% and purchase of used passenger vehicles rose 2.2% in May. The headline CPI for May 2022 would have been the same without the introduction of used vehicle prices.

For more information, consult the technical paper entitled “Measuring price change for used vehicles in the Canadian Consumer Price Index.”

Year over year shelter costs in May match the increase in April

In May, shelter costs rose 7.4% year over year, matching the increase in April.

Year over year, homeowners’ replacement cost rose to a lesser extent in May (+11.1%) compared with April (+13.0%), as prices for new homes showed signs of cooling.

Although prices for mortgage interest cost continued to decrease on a year-over-year basis, prices fell less in May (-2.7%) compared with April (-4.4%), putting upward pressure on the headline CPI.

Chart 5 
Yearly changes in homeowners’ replacement cost and mortgage interest cost

Chart 5: Yearly changes in homeowners' replacement cost and mortgage interest cost

Prices for services rise at a faster pace year over year

Year-over-year growth in prices for services increased to 5.2% in May, following a 4.6% gain in April. As public health measures have eased, Canadians have sought out leisure activities, stayed in hotels and have eaten out more often.

Higher year-over-year prices for traveller accommodation (+40.2%), most notably in Ontario (+56.8%), British Columbia (+43.2%) and Nova Scotia (+41.8%), reflected increased demand for travel within Canada compared with May 2021 when some COVID-19 restrictions were still in place.

Higher prices for food purchased from restaurants (+6.8%) in May also contributed to the increase in services prices.

Chart 6 
Year-over-year growth in prices for services increase

Chart 6: Year-over-year growth in prices for services increase

Canadians pay more for furniture

Canadians paid more to furnish their living spaces in May, as prices for furniture rose 15.8% year over year amid higher shipping and input costs. The introduction of tariffs for imported upholstered furniture (+22.7%) from China and Vietnam, first implemented in early May 2021, have contributed to the increase in prices.

RELATED ARTICLES

LEAVE A REPLY

Please enter your comment!
Please enter your name here

- Advertisment -
Google search engine

Most Popular

Recent Comments

Facebook
Twitter
YouTube
Instagram
WhatsApp