Canada's inflation rate dipped last month despite a surge at the gas pumps, as food prices retreated, Statistics Canada reported.
The statistical agency said its Consumer Price Index 12-month inflation rate was 1.5 per cent in May, down from 1.7 per cent in April. On a month-over-month basis, the CPI rose 0.4 per cent, due largely to a 4.1-per-cent jump in gasoline prices, but gas prices were nevertheless actually down 7.1 per cent from a year earlier.
The core measure of inflation, which excludes the eight most volatile components including many food and energy items, was 2.1 per cent year over year, down slightly from 2.2 per cent in April. Core CPI rose 0.3 per cent month over month.
Inflation excluding energy was 1.9 per cent year over year.
Food prices dipped 0.3 per cent in the month, but were still up 1.8 per cent from a year earlier. The year-over-year gain in food was the smallest in more than two years, as the inflationary effects of past declines in the Canadian dollar have begun to fade from grocery prices.
Stastcan noted in particular that prices for fresh fruit and fresh vegetables – both of which are heavily imported, and thus highly sensitive to currency fluctuations – eased in May.
"Inflation remains muted, but if energy prices hold onto their gains – let alone make further headway – we'll be above 2 per cent toward the end of the year," Canadian Imperial Bank of Commerce economist Nick Exarhos said in a research note.
The core measure, which serves as the Bank of Canada's operating guide in tracking the economy's underlying inflation trend when setting interest-rate policy, has now been above the central bank's 2-per-cent inflation target for three straight months, and 20 of the past 22 months. However, the bank has long attributed the slightly above-target readings to the temporary effects of the Canadian currency's sharp decline, and it has argued that true underlying inflation excluding these effects is well below 2 per cent.
"Inflation is not the primary concern of the Bank of Canada, as core inflation continues to bounce along the mid-point of its 1-3 per cent target range," Toronto-Dominion Bank senior economist Leslie Preston said in a report. "Canada's economy continues to work through the difficult adjustment to the oil price collapse, and the current stimulative stance of monetary policy remains warranted."
Statscan said shelter costs edged up 0.1 per cent in May from April, and were up 1.4 per cent year over year. Clothing and footwear prices were unchanged in the month, and up 1.1 per cent from a year earlier, snapping a string of four straight year-over-year declines, due largely to a spike in women's clothing.
By province, Ontario had the highest year-over-year inflation rate, at 1.9 per cent, followed by British Columbia and Manitoba at 1.7 per cent – reflecting the relatively strong economic growth in each of those provinces. Quebec's inflation rate was the lowest in the country, at 0.7 per cent, following by New Brunswick at 1.1 per cent and Saskatchewan at 1.2 per cent. The country's two most oil-heavy provinces, Alberta and Newfoundland, both had inflation rates of 1.5 per cent.
On a seasonally adjusted basis, CPI rose 0.2 per cent in May from April, matching April's gain, Statscan said.