Canada’s annual inflation rate surged to 2.8 percent in April, driven largely by escalating fuel prices, according to Statistics Canada’s latest report. Energy costs spiked by 19.2 percent year-over-year in April, following a 3.9 percent uptick in the previous month. Gasoline prices, in particular, soared by 28.6 percent compared to the previous year, attributed to supply disruptions in the Strait of Hormuz and the transition to pricier summer gasoline blends.
The ongoing conflict between the U.S., Israel, and Iran has led to the closure of the strait, causing global energy prices to rise. The temporary suspension of the fuel excise tax by the federal government in mid-April helped mitigate the overall price increase for the month.
The surge in energy prices was also the primary driver behind March’s inflation rate increase to 2.4 percent. The decision by Ottawa to eliminate the consumer carbon price earlier than planned skewed the annual price comparison higher in April.
The removal of the carbon price reduced gas prices by approximately 18 cents per liter in April 2025. While this adjustment initially dampened the headline inflation rate over the past year, its absence from the annual comparison in the current period has pushed inflation higher rather than lowering it.
In addition to energy costs, clothing and footwear prices rose by two percent in April, rebounding from a 0.4 percent decline in March. However, rents continued to rise, albeit at a slower pace, with a national increase of 3.6 percent year-over-year, down from 4.2 percent in March and showing the slowest growth in British Columbia.
Food inflation also moderated to 3.5 percent in April, compared to four percent in March, as prices for items like chicken, fresh vegetables, coffee, and tea saw slower increases following sharp spikes earlier in the year. Conversely, tour travel prices decreased by 11 percent in April, reversing an 11.5 percent rise in the previous month.
Core inflation measures, which exclude volatile items like fuel and food, rose at a much slower rate than overall inflation, indicating a softer economic landscape. BMO chief economist Doug Porter highlighted the subdued nature of the report, mentioning that without factors like fuel and grocery costs, inflation would be minimal.
Porter suggested that surging energy prices might be prompting consumers to restrain spending in other areas, potentially exerting deflationary pressure on various sectors. However, the softer core inflation could offer some relief to other industries, preventing inflation from spiking significantly as higher fuel costs begin influencing broader segments of the economy.
