Annual inflation rate climbs to 3.6% in May, highest in a decade
OTTAWA – Prices across the country rose at their fastest annual rate in a decade last month, with the promise of similar numbers until the fall as consumers can spend more freely. Statistics Canada said the 3.
OTTAWA – Prices across the country rose at their fastest annual rate in a decade last month, with the promise of similar numbers until the fall as consumers can spend more freely.
Statistics Canada said the 3.6% increase in the Consumer Price Index in May was the largest annual increase since May 2011 and topped the April reading of 3.4%, which was at l era the rapid annual rate in nearly a decade.
Part of the rise in inflation is due to the price comparison with the lows seen last year at the start of the pandemic for items such as gasoline, furniture and beef products.
Excluding gasoline, up 43.4% from the same month a year ago, the consumer price index would have been up 2.5%.
Added to the price increases are supply chain issues that have made it more expensive to build new homes or cars, with prices being passed on to consumers.
However, Statistics Canada said the increase in year-over-year price growth in May was not solely due to this comparison. He noted that more recent price pressures are also fueling inflation, with rising housing costs being one of the main reasons.
The price rally came even as public health restrictions dampened activity in high-contact sectors, TD senior economist James Marple said, noting that the acceleration in inflation is sagging. is produced faster than forecasters and the Bank of Canada expected.
Prices are expected to rise over the summer as provinces ease public health restrictions, businesses seek to make up for lost revenue, and consumers have more places to spend their money.
“Retailers have had a very difficult time, bars and restaurants have had a very difficult time over the past year and they will want to make up some of the ground lost with higher prices,” said Royce Mendes, Senior Economist of CIBC.
“They will want to pass these costs on and the key here is that consumers can actually absorb these costs, perhaps like never before because of all the savings during the pandemic. “
The Bank of Canada expects inflation to hover around 3% over the summer before slowing down later this year and then returning to the bank’s 2% target once Prices will cease to be compared to the lows seen in March and April of last year, and as supply chain problems resolve themselves.
Statistics Canada said the average of the three measures of core inflation, which are considered to be better indicators of underlying price pressures and closely monitored by the Bank of Canada, was 2.3% in May, against 2.1% in April. The May reading was the highest since April 2009.
BMO’s Canadian rate manager Benjamin Reitzes said in a note that while it is still too early to say whether firmer inflation is here to stay, the continued strength of the numbers could make the central bank a little less likely. comfortable with its accommodative monetary policy.
Bank of Canada Governor Tiff Macklem said the bank intends to keep its key rate at 0.25% until the economy recovers and inflation returns sustainably to the target, which is expected to happen in the second half of 2022.
Macklem is scheduled to appear before a Senate committee on Wednesday evening.
The Statistics Canada report says homeowner’s replacement costs, which include new home prices, rose 11.3% year over year in May, the largest increase since 1987. With the jump in May, Statistics Canada said it is now 16 straight months of price increases driven by buyers looking for bigger homes and higher construction costs.
Durable goods like vehicles rose 4.4% in May from their May 2020 levels, which the statistics agency said came amid low interest rates and confidence growing number of consumers.
This report by The Canadian Press was first published on June 16, 2021.
Jordan Press, The Canadian Press