Canadian consumer price inflation falls further into negative territory in May

Canada’s consumer prices fell further into the negative territory in May. On a year-on-year basis, the consumer price inflation came in at -0.4 percent from April’s -0.2 percent. On a month-on-month basis, consumer prices rose 0.1 percent. Rising gasoline prices, which were up 16.9 percent, was the main reason for the rise. Most other items saw prices fall month-on-month in May, reflecting the effect of the COVID-19 economic shock. Shelter, household operations, clothing and footwear, and health and personal care all saw prices fall on a month-on-month basis.

Food prices rose 0.1 percent sequentially, while recreation, education and reading saw a rise of 0.4 percent sequentially, bucking the trend. Meanwhile, meat prices rose sharply due to supply disruptions.

Broad based price softness was clearly seen in The Bank of Canada’s core inflation measures, with all three moving lower in the month. CPI-common eased to just 1.4 percent. Meanwhile, CPI-median and CPI-trim eased to 1.9 percent and 1.7 percent.

“There are promising signals in recent economic data and as economies open up, we expect to see some modest lift to consumer prices in the months ahead. Still, it will be a long road ahead and downside risks will remain elevated until a vaccine is broadly available”, added TD Economics.