Canada May Inflation Accelerates At Fastest Pace In A Decade

  • Inflation in Canada in May accelerated at its fastest pace in a decade for a second month in a row, driven by surging shelter and vehicle prices, data showed on Wednesday. 
  • Canada's annual inflation rate accelerated to 3.6%, from 3.4% in April, Statistics Canada said. That was slightly ahead of analyst expectations that the annual rate would rise to 3.5%. "The whole base-effect narrative is getting pretty tired. We're dealing with durable month-over-month increases that could be supply-chain driven in Canada," said Derek Holt, vice president of Capital Market Economics at Scotiabank. 
  • Shelter prices rose 4.2% in May, the largest jump since 2008, Statscan said. This as the homeowners' replacement cost index rose 11.3%, the largest yearly increase since 1987. The jump in inflation comes as many Canadian provinces continued to face shutdowns in May amid a harsh third wave of COVID-19 infections. Most regions have now begun to reopen. 
  • CPI common (is a measure of core inflation that tracks common price changes across categories in the CPI basket), which the Bank of Canada calls the best gauge of the economy's underperformance, was 1.8%, just below analyst expectations of 1.9%. CPI median was 2.4% and CPI trim (is a measure of core inflation that excludes CPI components whose rates of change in a given month are located in the tails of the distribution of price changes) was 2.7%. 
  • The Bank of Canada targets the 2% mid-point of a 1-3% inflation control range. It expects inflation to stay around 3% through the summer before easing later in the year.

(Source: Reuters)