May’s Inflation Rate Stays at 1.7 Percent as Rent Hikes Cool

Canada’s inflation rate stayed at 1.7 percent in May, remaining unchanged from the previous month due to a slowdown in the growth of shelter prices.

The latest Statistics Canada data indicated that when compared to one year ago, the Consumer Price Index saw downward pressure due to smaller price increases for rent and a decline in travel tours. Compared to last month, there were smaller declines for gasoline and cellular services, which put slight upward pressure on the index.

This marks the second month in a row where inflation has been below the Bank of Canada’s target of 2 percent.

StatCan said shelter costs grew at 3 percent in May after growing by 3.4 percent the previous month. On a year-over-year basis, prices rose 4.5 percent compared a 5.2 percent rise in April.

The agency said this slowdown was due to the increased availability of rental units and slower population growth. While faster price growth was seen in seven other provinces, the price slowdown in the populous province of Ontario was enough to offset that growth.

Prices for travel also fell 0.2 percent in May after a 6.7 percent increase in April, while prices for air transportation fell 10.1 percent on an annual basis compared to a 5.8 percent decline in April.

Prices for cellular services also fell by 5.5 percent in May compared to a 10.8 decline in April, while prices for new passenger vehicles rose by 4.9 percent annually in May, which was due in large part to more expensive electric vehicles.

Gasoline increased by 1.9 percent in May compared to April, which StatCan attributed to “higher refining margins due to higher costs associated with switching to summer blends.” Similar to the previous month, gasoline led the decline in consumer energy prices, falling 15.5 percent year-over-year in May compared to 18.1 percent in April.

The decline in energy prices was primarily due to the removal of the consumer carbon tax in March, according to StatCan. Prime Minister Mark Carney removed the tax that month shortly after taking office, saying it had become “too divisive” among Canadians.

In April, the Bank of Canada said the removal of the consumer carbon tax would temporarily reduce Canada’s inflation rate by around 30 percent, lowering the consumer price index by about 0.7 percentage points.