Consumer Price Index
The consumer price index (CPI) is a measure of the changes in the average price of a typical basket of goods and services purchased by consumers. The change in the CPI is the inflation rate.
Higher inflation signifies a decrease in the ability of a typical consumer to purchase a fixed basket of consumer goods and services.
- In May 2021, the average inflation rate in Canada was 3.6 per cent, up from 3.4 per cent in April 2021.
- Inflation rates in Ontario and the Toronto Census Metropolitan Area (CMA) also accelerated.
- The increase in Canadian CPI is the result of higher price of gasoline as well as the base effect of lower inflation recorded a year earlier.
- Inflation is forecasted to accelerate in the coming months.
The Canadian headline or year-over-year inflation rate as measured by the year-over- year change in the Consumer Price Index was 3.6 per cent in May 2021, the highest rate recorded in a decade.
Higher headline inflation rates were observed across Canada and resulted, in part, from the base effect, which describes a fall in the index a year earlier at the onset of the COVID-19 pandemic. The comparison between the relatively low index in May 2020, and the index in May 2021 (which recovered to more normal levels) resulted in a higher change.
The price of gasoline recorded a year-over-year increase of 43.4% in May 2021, and the year-over-year prices of food (+1.4 per cent) and shelter (+2.5 per cent) also continued to increase.
Inflation is expected to accelerate in upcoming months reflecting the base effect, and a recovery in commodity prices (particularly crude oil) as COVID-19 measures are eased and demand increases.
Canadian Inflation Forecast
Based on private sector forecasts, Canadian average annual inflation rate will accelerate over the next two years but will remain low by historic standards. The annual forecasts are as follows:
- 2021: 2.6 per cent; and
- 2022: 2.3 per cent.