Eight-year high a result of rising gasoline prices
Consumer costs in Canada saw the largest increase last month since March 2003, according to Statistics Canada. Prices increased in May by 3.7 per cent compared to this time last year. The growth is a continuation of last month’s rate of 3.3 per cent, which analysts had predicted would be maintained this month. The Canadian dollar rose almost one cent as a result of the announcement.
The month-over-month rise in prices more than doubled to 0.7 per cent from 0.3 per cent in April. Analysts expected the monthly rate to fall to 0.2 per cent.
Gasoline was the main reason for May’s growth as it rose 2.0 percent from April and was 29.5 percent higher than May 2010. This is the “largest increase since September 2005 when prices rose in the aftermath of Hurricane Katrina,” according to Statistics Canada. Excluding gasoline, the consumer price index rose 2.4 per cent in the 12 months to May, following a 2.2 per cent rise in April.
Energy costs continue to be a major component driving prices higher, as those costs increased 16.6 per cent during the 12 months to May. This is down only slightly from a 17.1 per cent increase in April.
The transportation component also continues to show growth as its costs rose 9.1 per cent in the 12 months to May, the largest year-over-year gain since Sept. 2005. This follows an 8.3 per cent gain in April.
Food prices increased 3.9 per cent in the 12 months to May, following a 3.3 per cent gain in April. Shelter costs also rose 1.8 per cent in the 12 months to May, following a 2.3 per cent increase in April.
Among major components, alcohol and tobacco prices rose 2.7 per cent over the year to May, slightly less than last month’s 2.4 per cent increase. Clothing and footwear prices showed growth with an increase of 1.1 per cent in the 12 months to May. This is only the second year-over-year increase since November 2009.
The bank’s core index — or inflation minus the most volatile elements, including energy, some fruits and vegetables, mortgage interest, and tobacco — advanced 1.8 per cent in the 12 months to May, following a 1.6 per cent gain in April.
The largest increase in consumer prices was observed in Nova Scotia for the fifth month in a row. The province saw a 4.6 per cent increase compared to last month’s 4.2 per cent increase.
The smallest increase was experienced in Alberta with prices averaging only 2.8 per cent higher than a year ago.
In the United States, the rate of inflation stands at 3.6 per cent, up from last month’s increase of 3.2 per cent. This is the biggest 12-month jump since Oct. 2008, according to the U.S. Labor Department. Vehicle prices and clothing prices are the principal source of the continued growth.