EconoFACTS

June 22, 2026 | 09:11

Cdn CPI: Some Rotten Tomatoes from the Maestro

Economist

Douglas Porter , CFA

Chief Economist and Managing Director
Economics

Douglas Porter brings more than three decades of experience analyzing gl... (Read more)

Douglas Porter , CFA

Chief Economist and Managing Director
Economics

Douglas Porter brings more than three decades of experience analyzing gl... (Read more)

Canada's consumer prices rose 1.0% in May, lifting the headline inflation rate four ticks to 3.2%, above expectations and the highest since late 2023. A variety of food prices and travel-related costs added to the predictable jump in pump prices to drive this monthly rise, as ex-gasoline inflation picked up two ticks to 2.2%. But that's pretty much where the bad news ends, as the Bank's two main measures of core were unchanged at right around 2%, and we know that gasoline prices are on track for about a 10% drop in June, which should clip the headline result next month. On core, both trim and median rose 0.2% m/m in seasonally adjusted terms, holding the yearly rates perfectly still at 2.0% and 2.1%, respectively. The three-month trends nudged above a 2% annualized pace (see table), but note that food is playing a big secondary role—tomatoes soared 45% y/y. Ex food & energy prices are only up at a 1.3% pace in the past three months (and 1.6% ex taxes), and are running below 2% on a year-on-year basis.

Is there any real evidence that the spike in energy is broadening to other areas of inflation? When looking at 183 components of the CPI, a smaller share reported gains of 3% or more last month (34% vs 38% in April), although the share of 55 core components picked up (to 40% from 36%)—so a mixed result there. After gasoline, some of the biggest contributors to annual inflation—rent, restaurant meals, autos, and property taxes—have little to do with energy prices. However, airfares have suddenly sprung from being a source of softness to rising 7.4% y/y. On the other side, there are plenty of signs that the soft housing market is acting as a drag on inflation, with appliance prices falling 5.7% y/y, and new home prices down 2.5% y/y and headed for another sizable drop next month.

Bottom Line: After a string of lower-than-expected core results in previous months, May's heavy headline reading stings somewhat. However, the reality is that core remains essentially right on target, and the recent big pullback in oil prices—if sustained—will deliver some important relief on headline readings in coming months. Still, the persistence of food inflation is a significant thorn, and we have to rate this one as a mild disappointment overall—it's never good news to see the overall inflation rate track above 3%, even if it is for one month only.

Table 1 - Canada — CPI

(month/month % change)

Source: BMO Economics, Haver Analytics