Weaker growth in gas prices helps slow annual inflation rate to 1.3 per cent in May

Andy Blatchford, The Canadian Press</span>
Published Friday, June 23, 2017 8:53AM EDT

OTTAWA -- Canadian inflation eased up on the accelerator last month as weaker year-over-year growth in gasoline prices helped slow the annual rate to 1.3 per cent, Statistics Canada said Friday.

The May inflation rate was also lower than April's reading of 1.6 per cent because prices declined in electricity, bakery products and Internet access services, the agency said in its latest monthly report.

The data comes as the economy strengthens and the Bank of Canada prepares to make a scheduled interest rate announcement on July 12.

Last month's smaller inflation number could weigh on the central bank's decision, as the rate moved further away from its ideal target of two per cent.

The latest consumer price index also showed lower readings for two of the Bank of Canada's three preferred measures of core inflation, which the central bank will scrutinize ahead of its interest rate decision.

Governor Stephen Poloz recently signalled he's moving closer to a hike in the benchmark interest rate. Many analysts now believe the bank will start moving the rate upwards from its historically low level of 0.5 per cent before the end of the year.

However, some economists have pointed to weak core inflation as a possible reason for the bank to hold off a little longer.

In its report Friday, Statistics Canada said year-over-year gas prices rose 6.8 per cent in May after climbing 15.9 per cent the previous month.

But despite the slower price growth, gasoline remained one of the biggest upward contributors to inflation last month, along with other costs associated with shelter and transportation.

The report also found weaker price growth in every province last month, with the biggest slowdown in Manitoba.

Food prices fell 0.1 per cent last month compared to a year earlier, shelter prices rose 1.9 per cent and transportation increased 2.2 per cent.

May inflation rate for selected Canadian cities

OTTAWA - Canada's national annualized inflation rate was 1.3 per cent in May, Statistics Canada says. The agency also released rates for major cities, but cautioned that figures may have fluctuated widely because they are based on small statistical samples (previous month in brackets):

-- St. John's, N.L.: 3.0 per cent (3.5)

-- Charlottetown-Summerside: 1.4 (1.5)

-- Halifax: 0.5 (0.8)

-- Saint John, N.B.: 2.4 (2.7)

-- Quebec: 0.6 (0.8)

-- Montreal: 0.8 (1.0)

-- Ottawa: 1.0 (1.6)

-- Toronto: 1.9 (2.2)

-- Thunder Bay, Ont.: 0.9 (1.5)

-- Winnipeg: 1.1 (1.8)

-- Regina: 0.9 (1.4)

-- Saskatoon: 1.0 (1.6)

-- Edmonton: 1.3 (1.7)

-- Calgary: 1.4 (1.8)

-- Vancouver: 1.8 (1.9)

-- Victoria: 2.0 (2.3)

May inflation rates for Canadian provinces, territories

OTTAWA - Canada's national annualized inflation rate was 1.3 per cent in May, Statistics Canada says. Here's what happened in the provinces and territories (previous month in brackets):

-- Newfoundland and Labrador: 3.0 per cent (3.6)

-- Prince Edward Island: 1.4 (1.6)

-- Nova Scotia: 0.5 (0.8)

-- New Brunswick: 2.4 (2.7)

-- Quebec: 0.7 (0.8)

-- Ontario: 1.4 (1.9)

-- Manitoba: 1.0 (1.6)

-- Saskatchewan: 0.9 (1.4)

-- Alberta: 1.2 (1.7)

-- British Columbia: 1.9 (2.1)

-- Whitehorse, Yukon: 2.1 (2.6)

-- Yellowknife, N.W.T.: 1.2 (1.2)