Canada experienced a surge in its annual inflation rate, reaching 2.8% in April, according to Statistics Canada. The significant increase was mainly driven by the sharp rise in energy prices, which soared by 19.2% year-over-year in April, following a 3.9% uptick in the previous month.
Specifically, the cost of gasoline spiked by 28.6% year-over-year due to supply disruptions in the Strait of Hormuz and the transition to pricier summer gasoline blends. The ongoing conflict involving the U.S., Israel, and Iran has led to global energy price hikes.
To mitigate the April price surge, the federal government suspended the fuel excise tax mid-month. Additionally, high energy prices were also a key factor behind March’s inflation rate increase to 2.4%.
The removal of the consumer carbon price by Ottawa ahead of schedule skewed the annual price comparison higher in April. This adjustment impacted gas prices, with a reduction of approximately 18 cents per liter in April 2025. While this move initially lowered the inflation rate over the past year, it now contributes to pushing inflation higher.
In addition to energy prices, clothing and footwear costs rose by 2% in April after a slight decrease in March. However, other sectors saw different trends, with rents increasing at a slower pace nationally, and food inflation easing to 3.5% in April from 4% in March.
Furthermore, prices for tour travels decreased by 11% in April, following an 11.5% increase in the previous month. BMO chief economist Doug Porter highlighted core inflation measures, excluding volatile items like fuel and food, which rose at a slower rate compared to overall inflation.
Porter suggested that the rise in energy prices might lead consumers to cut back on spending in other areas, potentially exerting disinflationary pressure on different sectors. On the other hand, CIBC senior economist Andrew Grantham noted that the softness in core inflation could provide some relief to other industries, helping to prevent a significant surge in inflation as higher gas prices impact various sectors.