Canadian inflation at 0.9% in May, as cost of food climbs

Canada's annual inflation rate was 0.9 per cent in May, edging up from 0.8 per cent in April, but the cost of food continues to push core inflation higher.

Lower energy prices continue to keep a lid on the consumer price index, with overall energy prices down 11.8 per cent in the 12 months to May, according to Statistics Canada.

Gasoline prices fell the most — 17.4 per cent compared with the same month a year earlier, but natural gas and heating oil also were down.

Excluding the cost of energy and other volatile items, core inflation moved up 2.2 per cent in the year, down from 2.3 per cent in April.

The increase in CPI was led by higher prices for food, with the overall cost of food up 3.8 per cent on the year. A lower Canadian dollar is pushing up the prices of fresh fruit and vegetables, many of them coming from the U.S. — you're paying 5.8 per cent more for vegetables and 2.9 per cent more for fruit.

BBQ costs more

But the biggest jump was in the price of meat, up 7.9 per cent in the past year.

Also rising in price were recreation, education and reading, clothing and footwear.

Statistics Canada lists the annual inflation rates by province (April's rate in brackets):

• Newfoundland and Labrador, 0.3 per cent (-0.4)
• Prince Edward Island, -0.7 per cent (-1.2)
• Nova Scotia, 0.5 per cent (0.3)
• New Brunswick, 0.6 per cent (-0.1)
• Quebec, 1.2 per cent (1.1)
• Ontario, 0.9 per cent (0.8)
• Manitoba, 0.5 per cent (0.9)
• Saskatchewan, 1.5 per cent (1.2)
• Alberta, 0.6 per cent (0.7)
• British Columbia, 0.8 per cent (0.5)
• Whitehorse, Yukon, -0.6 per cent (-0.7)
• Yellowknife, N.W.T., 1.5 per cent (1.6)

Canadian inflation comparatively high

Canada currently has one of the highest inflation rates in the industrialized world, according to BMO Nesbitt Burns chief economist Douglas Porter.

While 0.9 per cent seems low, it compares to 0 per cent in the U.S., 0.1 per cent in the U.K. and 0.3 per cent in the eurozone, he says.

"The Bank of Canada has consistently downplayed the run of core inflation above its 2 per cent target," Porter wrote in a note to clients.

And while higher inflation is often a reason to raise interest rates, that's not likely to happen in the near term in Canada, according to TD economist Brian DePratto.

"Currently, inflation is being driven to a large extent by special factors (including the dollar and energy prices), and inflation expectations remain firmly rooted around the 2 per cent target. At the same time, the bank faces the task of balancing growth and financial stability considerations," he said.