The annual pace of inflation held steady at 1.7 per cent in May as cooling shelter costs helped tame price pressures, Statistics Canada said on Tuesday.
Shelter costs rose three per cent in May, the agency said, marking a slowdown from 3.4 per cent in April.
Statistics Canada singled out Ontario as the major source of rent relief in the country. Slowing population growth and a jump in new supply helped dampen rent hikes in May.
“We know that population in Canada did not increase in the first quarter and immigration policies are a lot stricter now. That has led housing demand to go down, which in turn decreased rent prices, as well housing prices,” said Tu Nguyen, an economist at RSM Canada.
Mortgage interest costs, meanwhile, decelerated for the 21st consecutive month amid lower interest rates from the Bank of Canada.
Economists had broadly expected inflation would remain unchanged heading into Tuesday. And according to Nguyen, retaliatory tariffs haven’t fed as much into price growth as some were expecting.
“A lot of important exports were able to access the market tax-free, thanks to CUSMA,” said Nguyen, referencing the Canada-U.S.-Mexico free trade agreement.
“A lot of goods became CUSMA-compliant, making them eligible to be imported or exported without getting tariffed, basically. I think that’s why we haven’t seen a material increase in prices — and that’s generally good news for Canadians.”
Core measures ticked down slightly
The removal of the consumer carbon price continues to drive down gasoline costs annually, Statistics Canada said, but a smaller monthly decline in prices at the pump from this time last year limited the drop.
The cost of food from the grocery store rose 3.3 per cent annually in May, half a percentage point lower than the hike seen in April.
Lower prices on travel tours and air transportation also dampened inflation last month.
The agency says the cost of a new vehicle accelerated in May, rising 4.9 per cent annually, thanks in large part to more expensive electric vehicles.
Inflation excluding tax changes — stripping out influences from the carbon price removal — was also steady at 2.3 per cent last month.
Bank of Canada governor Tiff Macklem said last week that the central bank would be paying closer attention to this figure as it tries to look past temporary impacts to see what’s really happening to inflation amid tariffs.
The central bank’s closely watched core inflation metrics ticked down a tenth of a percentage point to three per cent in May.
“The latest inflation results are broadly similar to April’s outing — a deceptively calm headline number with core hovering too far above the two per cent target for comfort,” wrote Douglas Porter, chief economist at BMO.
“The [Bank of Canada] will likely need to see much more improvement before it’s convinced that underlying inflation is headed back to two per cent.”
The Bank of Canada’s next interest rate decision is set for July 30.