Canadian CPI steady at 1.7% in May amid slower growth in housing, travel costs

Investing.com -- Canada’s annual inflation rate held steady at 1.7% in May, unchanged from April and in-line with analyst estimates, according to data released by Statistics Canada on Tuesday. The subdued pace was driven by a softer increase in rent and a decline in package travel prices, which helped offset modest upward pressure from gas and mobile service costs.

Excluding energy, the Consumer Price Index (CPI) rose 2.7% year-over-year in May, down from 2.9% a month earlier, highlighting underlying price moderation. On a monthly basis, the all-items CPI rose 0.6%, with the seasonally adjusted figure showing a more modest 0.2% gain.

CIBC (TSX:CM)’s Katherine Judge called the report "a step in the right direction for a July cut." "Overall, the moderation in core measures is a step in the right direction for the Bank of Canada and they will want that progress to be maintained in the next report in order to feel comfortable cutting in July," she concluded.

The deceleration in shelter prices played a central role in the overall inflation picture. "The increased availability of rental units, coupled with slower population growth compared with spring of the previous year, contributed to the slowdown in rent price growth in May," Statistics Canada said. Rent prices rose 4.5% year-over-year, down from April’s 5.2%, with Ontario posting the sharpest drop due to increased vacancy rates.

Meanwhile, mortgage interest costs, another major component of shelter, also slowed, rising 6.2% in May after a 6.8% increase in April. This marks the 21st consecutive month of deceleration for the index, reflecting cooling pressures in the housing finance segment.

In transportation, prices for travel tours slipped 0.2% annually in May after a sharp 6.7% increase in April. Airfares declined 10.1% year-over-year, adding further drag to the headline figure, compared with a 5.8% drop the previous month.

Gasoline prices were 15.5% lower compared to May last year, though they posted a 1.9% increase month-over-month due largely to higher refining margins. The decline in annual prices reflects the removal of the federal carbon levy, which kept pump costs under pressure compared to 2024.

Telecommunications prices also saw notable month-over-month volatility, with cellular service prices jumping 7.2% in May after the end of promotional offers. Still, consumers paid 5.5% less than they did a year earlier—an easing compared with April’s 10.8% annual decline.

Regional dynamics varied, with inflation accelerating in six provinces and slowing in three. In Alberta, homeowner insurance costs rose sharply for the second straight month, climbing 11.9% year-over-year in May, up from 7.7% in April, according to Statistics Canada.