Canadian Inflation Slows to 2.7% in April, Grocery Prices Ease

Ottawa, Canada – Statistics Canada announced on Tuesday that the annual inflation rate in Canada decelerated to 2.7% in April, as a reduction in grocery prices countered higher fuel expenses.

According to the agency, the inflation rate for food purchased from grocery stores dropped to 1.4% annually last month, down from 1.9% in March. Declines in the yearly price growth for meat, non-alcoholic beverages, and bakery products contributed to this slowdown. Conversely, fruits, nuts, and seafood products experienced annual price drops.

Although prices at grocery stores surged by 21.4% from April 2021, household furnishings, clothing, and footwear registered year-over-year price declines.

Gas prices, however, increased at a quicker annual pace, with consumers paying 7.9% more month-to-month in April. This rise was attributed to higher global oil prices, the switch by gas stations to pricier summer blends, and an increase in the federal carbon levy.

Rent and mortgage renewals continued to push up shelter inflation, especially in Alberta, where rent prices surged by 16.2% year-over-year, nearly double the national hike of 8.2%.

While prices rose on a month-to-month basis in April, the overall inflation rate slowed from 2.9% in March due to a smaller increase compared to the same period last year.

BMO chief economist Doug Porter described April’s report as the fourth consecutive “tame” reading for the annual inflation index. This also serves as the last reading before the Bank of Canada’s interest rate decision on June 5.

All preferred metrics of “core” inflation by the central bank cooled below three per cent in April, according to StatCan’s report. The Bank of Canada, awaiting signs of sustained easing in underlying inflation, has indicated its readiness to cut its benchmark interest rate.

CIBC senior economist Andrew Grantham suggested that the April data provided the needed reassurance for a rate cut in June. However, TD Bank’s managing director and senior economist Leslie Preston anticipated a more patient approach, leaning towards a rate cut in July rather than June, considering core inflation’s proximity to the upper bound of the Bank of Canada’s target range.

After the release of the data, money markets raised their bets for a June rate cut to nearly 55% from 39% earlier, according to Reuters.