Statistics Canada says the consumer price index in May was up 3.6 per cent compared with a year ago, its largest yearly increase since May 2011.
The reading for May compared with a year-over-year gain of 3.4 per cent in April, which at the time was the fast annual rate in nearly a decade.
Part of the rise in the headline inflation barometer is due to comparing prices to the low levels seen last year at the start of the COVID-19 pandemic, such as for gasoline, furniture and beef products.
Excluding gasoline, which was up 43.4 per cent compared with the same month one year ago, the consumer price index in May would have been up 2.5 per cent compared with a year ago.
However, Statistics Canada says the increase in year-over-year price growth in May was led by rising prices for housing and passenger vehicles.
Homeowner replacement costs, which include prices for new housing, rose 11.3 per cent year-over-year in May, the largest increase since 1987. Statistics Canada says prices have risen for 16 consecutive months as buyers look for larger homes and higher construction costs for materials.
Durable goods like vehicles were up 4.4 per cent in May from their levels in May 2020, which the statistics agency noted came against the backdrop of low-interest rates and rising consumer confidence.
The Bank of Canada expects inflation to hover around three per cent over the summer before easing later this year, then returning toward the bank’s two-per-cent target.
The central bank plans to keep its key policy rate at 0.25 per cent until the economy has recovered and inflation is sustainably back on target.
Statistics Canada said the average of the three measures for core inflation, which are considered better gauges of underlying price pressures and closely tracked by the Bank of Canada, was 2.3 per cent in May, up from 2.1 per cent in April.
The reading May was the highest seen since April 2009.
CIBC senior economist Royce Mendes said the headline inflation reading should fade beginning this month as prices aren’t being compared with the lows seen in March and April of 2020.
“As a result, the Bank of Canada will continue to look through the recent acceleration in inflation, instead focusing more on the remaining slack in the economy to justify keeping rates on hold until the second half of 2022,” he wrote in a note.
This report by The Canadian Press was first published June 16, 2021.