- Nick Exarhos, CIBC World Markets economist
Canada's inflation unexpectedly accelerated in May, led by increasing food prices. Canada's annual inflation rate ticked up to 0.9% from 0.8% in April, but remained below the lower end of the Bank of Canada's 1% to 3% target band, according to Statistics Canada. The annual rate rose on the back of food prices, which increased 3.8% from May 2014. However, the energy index declined 11.8% in the 12 months to May, after the 13.5% decrease in April. Meanwhile, the core rate, which excludes eight volatile components, slowed to 2.2% from 2.3% in April. On a monthly basis, overall consumer prices edged higher by 0.6%, while core prices climbed by 0.4%. The central bank's April forecast was for total inflation to average 0.8% in the second quarter, and core prices to advance 2.1%. The Bank of Canada sets its benchmark interest rate, now 0.75%, to keep inflation in the middle of a 1% to 3% range, and the next decision is July 15.
A separate report showed retail sales fell by 0.1% to C$42.5 billion in April amid drops in food and electronics, Statistics Canada said. That was less than a median estimate of a 0.7% increase. At the same time, core retail trade, which excludes volatile automobile and parts sales, declined 0.6%, compared with the expected 0.3% advance.
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