Canada inflation rate rises 0.7 per cent in May

Canada inflation rate rises 0.7 per cent in May

Canada’s inflation rate rose 0.7 per cent in May and core inflation stuck at 1.1 per cent, below expectations.

Statistics Canada said Friday that the year-over-year rise was driven by higher natural gas prices, which rose 15 per cent over the past year, the largest increase since December 2008.

Economists had expected an overall annual rate of 0.9 per cent, with core inflation at 1.2 per cent.

May’s figures follow a 0.4 per cent rise in the Consumer Price Index (CPI) in April, due largely to falling gasoline prices.

“It’s a very benign inflation picture,” RBC economist Paul Ferley told the Business News Network (BNN) Friday morning.

He says the concern is consumer caution, which can weigh on overall economic growth.

CPI is an indicator of price changes for consumer goods in Canada, and is widely used to measure the rate of inflation.

The Bank of Canada is closely watching inflation as it decided whether to raise – or some economists believe possibly lower – interest rates, which haven’t budged since September 2010. The bank's next scheduled rate announcement is July 17.

The central bank lowered its 2013 growth forecast by half a point to 1.5 per cent. It has estimated 2014 economic growth will be 2.8 per cent followed by 2.7 per cent growth in 2015.