Inflation 1% in May, fourth lowest in Canada

  • Inflation 1% in May, fourth lowest in Canada

Inflation 1% in May, fourth lowest in Canada

Last month's 5.5 per cent fall in electricity prices was one of the biggest downward contributors and recent changes in Ontario's hydro rates appear to have had an impact on the national number.

Canadian inflation eased up on the accelerator last month as weaker year-over-year growth in gasoline prices helped slow the annualized rate to 1.3 per cent.

Food prices have fallen in the past year, contributing to a cooling rate of inflation, Statistics Canada says.

Meanwhile, the average rate of core inflation, based on three gauges used by the Bank of Canada, slowed for a third straight month, to hit 1.3% in May.

The latest consumer price index also shows lower readings for two of the Bank of Canada's three preferred measures of core inflation, which the central bank will scrutinize ahead of next month's interest-rate decision.

Governor Stephen Poloz recently signalled he's moving closer to a hike in the benchmark interest rate.

Consumer price inflation decelerated to1.3% (year-on-year) in May from 1.6% in April.

"Further deceleration in core inflation is more likely to stay the bank's hand in July, while some stabilization or uptick, which can not be excluded at this stage, will put further pressure on the Bank of Canada to act", she said.

Food prices rose 0.3% (month-on-month) bringing the year-on-year rate to -0.1%, up from -1.1% in April.

Gasoline prices fell 4.0% on the month and this was the main contributory to a 0.7% decline in transport costs for the month which held the annual rate at 2.2%.

The cost of living was also lower in BC in May - dipping to 1.9 per cent from 2.1 per cent the month earlier, but this province still has one of the highest inflation rates in the country, trailing only Newfoundland, New Brunswick and Whitehorse, Yukon.

"The market thinks that the inflation peak is near and that Banxico will end its cycle this Thursday", Finamex analyst Guillermo Aboumrad said in a note to clients.