UPDATE - Canada's annual consumer inflation rises 2.9% in May, up from 2.7% gain in April

UPDATES WITH ADDITIONAL FIGURES, INFORMATION

By Ovunc Kutlu

ISTANBUL (AA) - Canada's consumer inflation annually came in at 2.9% in May, higher than market estimates of 2.6%, and gaining pace from a 2.7% year-on-year gain in April, the country’s statistical authority said Tuesday.

The figure, however, reflects a significant slowdown since the 8.1% annual gain seen in June 2022 – the highest level for the consumer price index (CPI) in 39 years.

"Acceleration in the headline CPI was largely due to higher prices for services, which rose 4.6% in May following a 4.2% increase in April," Statistics Canada said in a statement.

"Faster price growth for services was led by cellular services, travel tours, rent and air transportation," it said, noting that prices for goods grew 1% in May, the same rate as in April.

On a monthly basis, the consumer price index was at 0.6% in May, also coming above the market estimates of 0.3%.

The monthly figure, in addition, accelerated from a 0.5% increase in April.

- Tourism, food, rental housing prices

Statistics Canada said prices for travel tours and air transportation rose at a faster pace in May, with annual gains of 6.9% and 4.5%, respectively. On a monthly basis, they rose 10.4% and 2.3%, mostly to the US in both cases.

Prices for food purchased from stores rose 1.5% year-on-year basis in May, following a 1.4% increase in April, showing its first acceleration since June 2023, it added.

"On a month-over-month basis, grocery prices rose 1.1% in May 2024. While this monthly increase is seasonally typical, it is the largest since January 2023," said the statement.

The monthly increase in May was driven by higher prices for fresh vegetables, with a gain of 3.5%, and non-alcoholic beverages 2.4%, followed by fresh fruit 2.2% and meat 1.3%.

Annually, prices rose at a faster pace in May, compared with April, in six provinces of Canada, according to the agency.

"On a year-over-year basis, rent prices rose 8.4% in Ontario in May, up from a 6.1% increase in April. This contributed to faster growth in the national rent index, which rose 8.9% in May, outpacing growth in Ontario for the ninth consecutive month," it said.

Statistics Canada said both the high interest rate environment and population increases continue to put upward pressure on the rent index in the nation.

The Bank of Canada on June 5 reduced the policy rate by 25 basis points, its first rate cut in more than four years. The target for the overnight rate was lowered to 4.75%, with the bank rate at 5% and the deposit rate at 4.75%.

The move is the first rate cut by the central bank since March 2020, when it lowered the policy rate 25 basis points in response to the economic conditions caused by the coronavirus pandemic.