Preview: Due June 22 - Canada May CPI - A further lift from energy while core rates pause after a weak April
We expect May Canadian CPI to see a further acceleration to 3.0% yr/yr from 2.8% (to 3.04% from 2.82% before rounding) while the Bank of Canada’s core rates see little change following a notable slowing in April which took two of the three measures close to the BoC‘s 2.0% target.
On the month we expect CPI to rise by 0.8% and 0.6% ex food and energy, with seasonally adjusted gains of 0.4% and 0.2% respectively. The lift from energy will be slightly less on a seasonally adjusted basis than in March and April but we expect the ex food and energy rate to see its strongest increase since December on a seasonally adjusted basis, correcting from very soft outcomes of flat in April and -0.1% in March. Recreation, education and reading, most notably travel tours, was particularly soft in April, and could see a correction, while higher energy costs may feed into air fares, further boosting transport. The economy is likely to return to growth in Q2 after two straight marginal quarterly declines and this could ease deflationary pressure.
April data saw yr/yr growth accelerate to 2.8% from 2.4% in March but the acceleration could be fully explained by the April 2025 abolition of a carbon tax drooping out. The positive from April’s monthly gain in energy was more than offset by a significant slowing ex food and energy, to 1.5% yr/yr from 1.9%. We expect ex food and energy to remain at 1.5% yr/yr in May, albeit with a marginal slowing to 1.48% from 1.49% before rounding.
The ex food and energy rate is not one of the BoC’s three core rates, which all slowed in April, in part because April 2025 data was on the firm side of trend. The data dropping out is less firm this month, limiting the scope for further slowings. We expect CPI-Median to be stable at 2.1% and CPI-Trim to be stable at 2.0% with CPI-Median stable even before rounding at 2.10% though we do expect CPI-Trim to slip to 1.95% from 2.00%. We expect CPI-Common, the only one of the three core rates to see its yr/yr rate increase in May 2025, to slip to 2.4% from 2.5%. The BoC gives less attention to CPI-Common than to CPI-Median and CPI-Trim.
