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A customer fills up at a gas station in Toronto.

Fred Lum/The Globe and Mail

Canada's inflation rate edged up to 0.7 per cent last month driven primarily by a surge in natural gas and food prices.

It was just shy of the 0.9 to 1-per-cent that most economists were predicting. Higher natural gas prices pushed the increase from April's extremely low rate of 0.4 per cent.

Transportation costs fell 0.5 per cent, with prices for new cars and gasoline both in decline. Prices for gasoline fell 1.5 per cent, milder than the 6-per-cent decline in April.

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Natural gas prices surged 15.4 per cent in the 12 months to May and food saw a 1.5-per-cent price jump.

Fresh vegetables and baked goods were the biggest driver of that number, but prices for fresh fruit and meat were also on the rise, although not as steeply as in April.

Prices for alcohol and tobacco advanced 2.5 per cent during the month.

Alcohol saw a 2.1-per-cent price increase with beer leading the charge.

Housing costs, driven largely by the rise in natural gas prices, rose 1.3 per cent despite the fact that mortgage interest costs declined 4.1 per cent.

While prices rose in most provinces, with Alberta highest, it was a different story on the coasts. New Brunswick and British Columbia were the only provinces to see declines to their consumer price index.

In addition, core inflation, which doesn't include more volatile categories like fuel and is used by the Bank of Canada to craft policy, remained unchanged at 1.1 per cent.

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The seasonally adjusted core index, which posted no change in April remained static in last month as well.

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