Canada’s inflation rate increased to 3.6 per cent in May, the fastest pace in a decade, Statistics Canada says.
The data agency said in a news release Wednesday that the cost of just about everything is going up at a much faster pace than usual, from shelter and vehicles, to food, energy and consumer goods.
The cost of shelter increased by 4.2 per cent in the year up to May, the fastest rise in the cost of putting a roof over one’s head since 2008. And the cost of filling a home with furniture and appliances also went up, by 4.4. per cent. That’s the fastest pace of an increase for so-called durable goods since 1989.
Furniture prices in particular rose by 9.8 per cent in the past year, their biggest jump since 1982. Last month the government slapped tariffs of up to 300 per cent on some types of upholstered furniture from China and Vietnam.
Gasoline prices have risen by 43 per cent in the past year, a figure that looks especially high because it’s being compared to May of last year, when demand and prices for gasoline cratered. But even on a monthly basis, the cost of gasoline went up in May by 3.2 per cent compared to April’s level.
Gas isn’t the only part of driving that’s getting more expensive either, as the price of new cars increased by five per cent in the past year. That’s the biggest jump in vehicle prices since 2016, and the biggest reason for it is an ongoing shortage of semiconductors, a global trend that has jacked up the price of anything that uses microchips.
And the price of traveller accommodation rose by 6.7 per cent. That’s the highest rate seen since the pandemic began and demand for hotel stays plummeted.
Economists had been expecting the inflation number to be strong, with a consensus of those polled by Bloomberg expecting the rate to come it at around 3.5 per cent.
But the inflation rate was even higher than that, which suggests Canada’s economy is, indeed, starting to kick into high gear after stalling out during COVID-19.
“We’re past the heating up stage now.,” TD Bank’s economist James Marple said. “Inflation in Canada is hot.”
While undeniably hot, Canada’s inflation rate is not as warm as the one in the U.S., where the cost of living went up at an annual rate of 3.8 per cent last month.
Huge jump from a low bar
Economist Avery Shenfeld with CIBC says that while the annual price increases are eye-popping, it’s important to remember that May’s numbers are being compared to the situation in May 2020, when just about every facet of the economy was in the doldrums.
“Prices look elevated compared to where they were a year ago, but that’s because prices a year ago were rock-bottom levels … in the throes of the first wave of COVID,” he said in an interview with CBC News. “We really haven’t had that much inflation if you measured prices relative to where they were in the spring of 2019.”
If high inflation persists, the Bank of Canada may need to step in to cool things down with higher rates, but for now Shenfeld isn’t worried about the current bout of inflation causing any permanent damage.
“Canadians are gonna find a few things a little denting to their pocketbook, but we’ve also come off a year where we weren’t spending that much of our income, so there’s a lot of purchasing power out there in the hands of the average Canadian.”