Gas prices tied to the war in Iran sent Canada's annual inflation rate above three per cent in May for the first time since 2023, and the bill is showing up at the pumps, at the grocery store, and at the airport.
Statistics Canada reported Monday that the annual inflation rate climbed to 3.2 per cent in May, up from 2.8 per cent in April. The increase topped most economists' expectations.
What's driving prices higher
Gas was the biggest factor. StatCan said fuel prices rose 33.2 per cent year-over-year in May, as ongoing conflict in the Middle East kept the Strait of Hormuz closed to oil tankers. It marks the most Canadians have paid for gasoline since June 2022, when Russia's invasion of Ukraine disrupted global supply.
There is some relief on the horizon. Prices at the pumps have been falling in recent weeks as peace talks between the United States and Iran moved forward.
Jet fuel costs linked to the same conflict also showed up in May's numbers, after being absent from April's data. Air transportation rose 7.4 per cent annually last month, reversing a slight decline in April.
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Groceries keep climbing
Grocery inflation accelerated again, rising half a percentage point to 4.3 per cent annually. That marks 16 straight months that grocery prices have outpaced the headline inflation rate.
Fresh vegetables were a major driver, up 5.5 per cent in May. StatCan called it the largest monthly May increase since 2008, citing reduced supply and higher fuel costs.
Tomato prices rose 45.2 per cent annually. StatCan pointed to tough growing conditions in Mexico, compounded by U.S. tariffs that led Mexican growers to plant less acreage, tightening supply further.
Computer equipment, software and supplies also got more expensive, rising 3.9 per cent in May. StatCan attributed the increase to supply pressure from artificial intelligence data centres competing for key computer inputs.
Where costs are easing
Not everything went up. Shelter inflation continued to ease, dropping to 1.7 per cent year-over-year in May. Prices for passenger vehicles, tools and household equipment were also rising at a slower pace than in previous months.
What comes next
The May inflation report is the last major price data the Bank of Canada will have before its next interest rate decision on July 15.
*With files from The Canadian Press
