Canada’s inflation rate moved higher in December, driven less by new price shocks than by the delayed fallout of last year’s temporary tax break. The data show inflation pressures becoming more concentrated in food and services, even as cheaper gasoline continues to mask broader cost strains.
The Consumer Price Index rose 2.4% year over year in December, up from 2.2% in November. The acceleration was largely mechanical. Prices that were temporarily suppressed by the GST and HST break in late 2024 have now dropped out of the annual comparison, pushing headline inflation higher without reflecting fresh demand pressure.
Excluding gasoline, inflation climbed to 3.0%, reflecting what households are facing day to day. Food, dining, and alcohol prices were the dominant contributors to the faster pace.
Restaurant prices surged 8.5% from a year earlier, more than double the increase recorded in November. Alcoholic beverages also accelerated sharply.
Grocery prices continued to rise, up 5.0% year over year, even though they were flat month to month. Coffee prices jumped more than 30%, while beef prices rose nearly 17%, underscoring how global supply issues and input costs are still feeding into household food bills. Snack foods and confectionery also posted steep annual increases.
Gasoline remained the main offsetting force. Prices fell 13.8% from a year earlier, reflecting a sharp monthly decline and lower crude oil prices amid global oversupply. Without it, headline inflation would have been materially higher in December.
Travel-related prices sent mixed signals. Airfare declined slightly year over year but rose sharply month to month during the holiday season.
Regionally, inflation accelerated in most provinces. British Columbia was a notable exception. The prices decelerated due to a base-year distortion in traveller accommodation tied to unusually strong demand during major events in late 2024.
December’s data reinforce a growing divide within inflation. Goods tied to energy are pulling prices down, while food and services are pushing them higher.