‘Data for Business’ is an effort of the Langley Chamber, in partnership with the Canadian Chamber’s Business Data Lab, to bring our members reports, stats, and analysis on economic and business data to help inform business and investment decisions. Read our latest update below:

The Consumer Price Index (CPI) – a measure of inflation --  increased 2.8% year over year in April, up from 2.4% in March. Inflation accelerated in all provinces except BC, where price growth was the same as March at 2.5%, with decreases in residential rents helping to slow our inflation increase. Higher energy prices overall, but particularly for gasoline, was the main driver of this acceleration in overall inflation as impacts of the conflict in Iran persist.

Key Takeaways
CPI rose 2.8% year over year in April, up from 2.4% in March. The increase in headline inflation was once again driven by a sharp rise in energy prices, specifically gasoline. This was lower than the median economist estimate of 3.1% and excluding gasoline, CPI rose at a slower pace of 2%. Some offsetting effects came from lower food, rent, and travel tours. Prices increased 0.4% monthly.

The Bank of Canada’s core inflation measures improved in April, averaging (CPI trim and median) 2.1%, slightly better than 2.3% in March. Inflation momentum, measured by the three-month annualized growth rate, rose 1.8%, inching closer to the 2% inflation target.

Gasoline prices accelerated in April, rising by 29% year-over-year, as both higher oil prices, and base-year effects catapulted the index higher. A few additional factors impacted the category including the suspension of the federal excise tax on fuel which dampened some of the upside price impact. 

There were some positive improvements on the affordability front, April prices for food and rent eased. Overall, food prices rose 3.5%, with food purchased from stores outpacing restaurant price growth, rising 3.8% and 3% respectively. Rent prices rose 3.6%, marking the slowest rental price growth since January 2022, as supply builds up in key markets ahead of a higher activity period.

Goods prices rose 4.4%, following 2.1% in March as fuel prices feed into costs. Services inflation was relatively muted, only growing 1.7%, driven by a decline of 11% in travel tours inflation in April following a busy March travel season.

Implications
Energy has overtaken other inflation categories, with higher gasoline prices adding 1.2 percentage points to headline inflation in April. Even so, nearly 38% of the CPI basket is growing at or above 3%, but this share has been declining since December. It remains early for higher oil prices to pass through into other categories, though there are some early signs in clothing and footwear.

More importantly, core inflation measures eased in April and remain around the 2% target. Their path will be central to the Bank of Canada’s next interest rate decision. Financial markets pushed back expectations for a rate hike from September to October following April’s inflation print.

Still, consumers and businesses are facing higher costs, regardless of gasoline’s relatively small weight in the overall CPI basket. This reduces purchasing power and could dampen consumer resilience seen so far. With the economy still in excess supply, it can absorb some higher prices for now.
 

Commentary:
“Inflation warmed up in April, but is more of an isolated energy story for now, keeping below the Bank of Canada’s 3% upper bound. The month was noisy, led by higher gasoline prices and amplified by base-year effects from lower prices a year ago. Some of that pressure was offset by the temporary suspension of the fuel excise tax and the removal of the consumer carbon tax.

The key signal to watch is whether core inflation remains stable in the months ahead. Encouragingly it did in April, with some categories, including food, showing signs of improvement. Still, Canadians’ patience may be tested as headline inflation moves closer to 3% heading into the summer.

For the Bank of Canada, two factors remain paramount: the impact of U.S. trade uncertainty and the direction of oil prices. In an economy that remains weak and in excess supply, despite some resilience early in the year, these are the events most likely to determine whether interest rates move up or down from here. Nothing in April inflation data sticks out as moving the needle for rates.”   - Andrew DiCapua, Principal Economist, Canadian Chamber of Commerce