May 2022 Consumer Price Index data: 7.7%, the highest rate in almost 40 years, but the worst may be yet to come!

June 22, 2022

It was another incredible month for Canada’s CPI inflation, which hit 7.7% in May. This is the highest rate in nearly 40 years — and well above market expectations yet again. Price pressures continue to broaden. Sky-high gas prices could push the headline above 8% next month, while the 2022 annual could now exceed 7%! This cements the case for the Bank of Canada to follow the Fed’s 75 basis point hike at its next announcement in July.

KEY TAKEAWAYS

Canada’s headline Consumer Price Index (CPI) inflation continued to rise hitting 7.7% in May, up from 6.8% in April. This is the highest rate of inflation since 1983.
Price pressure are broadening. Inflation excluding food and energy, rose 5.2% in May (up from 4.6% in April). The average of the Bank of Canada’s three “core measures” continued to rise, it’s now up to 4.7%.
Russia’s invasion of Ukraine continues to drive global food and energy prices. Energy prices rose 35% compared to last year. This is being driven by gas prices (48% year-over-year), and on pace to rise even further in June.

Food prices are also a key inflation driver (8.8%). Grocery prices rose 10% year-on-year in May, equaling the gain in April.
Canadians received no relief from the prices of shelter and transportation. Shelter prices held steady at a 7.4% rate in May, while transportation prices rose 14.6%, compared to 11.2% in April.
The inflation rate for goods rose to 10.4% (up from 9.1% last month). Services prices rose to 5.2% (from 4.6%). With both aggregates continuing to worsen, it is still too early to call a peak for Canadian inflation.
Every province had higher inflation in May, with Prince Edward Island experiencing an 11.1% rate. Saskatchewan had the lowest inflation rate, with prices rising 7%.
Inflation in Canada is now running at 4.6% over the pandemic period — well above the 2% target, but below the 5.6% experienced in the United States.