The Consumer Price Index (CPI) in Canada saw a modest increase of 2.9% year-over-year in May 2024, up from a 2.7% rise in April. This slight acceleration is primarily attributed to the rising costs of services, which increased by 4.6% in May following a 4.2% hike in April, according to Statistics Canada.
The driving force behind the increased CPI was a significant rise in the cost of services. Key contributors to this surge include cellular services, travel tours, rent, and air transportation. Although prices for goods grew at a steady rate of 1.0% compared to April, it was the service sector that pushed the overall index higher.
On a monthly basis, the CPI saw a 0.6% increase in May, largely due to a sharp rise in travel tour prices. When adjusted for seasonal variations, the monthly CPI growth stood at 0.3%.
Cellular service prices exhibited a complex trend. While the year-over-year decline in cellular service prices slowed down, falling 19.4% in May compared to a steeper 26.6% drop in April, there was a month-over-month increase of 1.2% in May. This fluctuation is partly explained by a significant price drop in May 2023, creating a base-year effect that influences current comparisons.
The costs associated with travel tours and air transportation have risen notably. Travel tour prices increased by 6.9% year-over-year in May, driven by a substantial 10.4% month-over-month hike. Similarly, air transportation costs climbed by 4.5% on an annual basis, with a 2.3% increase from April to May. These increases are primarily linked to higher prices for trips to the United States.
Grocery prices experienced a slight year-over-year acceleration, rising by 1.5% in May compared to 1.4% in April. This marks the first acceleration in grocery prices since June 2023. Over the past four years, grocery prices have surged by 22.5%.
On a monthly basis, grocery prices increased by 1.1% in May, the largest monthly rise since January 2023. Fresh vegetables saw the most significant hike at 3.5%, followed by fresh fruit at 2.2%, meat at 1.3%, and non-alcoholic beverages at 2.4%. The increase in meat prices, particularly fresh or frozen beef, is attributed to high demand and limited supply.
Regionally, inflation rates varied, with six provinces experiencing faster price increases in May compared to April. Notably, Ontario saw rent prices soar by 8.4% year-over-year in May, up from a 6.1% rise in April. This contributed to a national rent index increase of 8.9%, the ninth consecutive month where national rent growth outpaced that of Ontario. The upward pressure on rents is linked to higher interest rates and population growth.
While the cost of goods remained stable, the substantial increases in travel, rent, and grocery prices reflect broader economic pressures. As the year progresses, these trends will likely continue to shape the financial landscape for Canadian consumers.