The Consumer Price Index (CPI) increased 3.6% on a year-over-year basis in May, reported Statistics Canada. The agency stated that this marked the most substantial annual increase since May of 2011. Excluding the price of gas, the CPI increased 2.5% over the last 12-month period.
“Although base-year effects continue to impact the 12-month price movement for some specific consumer goods, such as gasoline, furniture, and beef products, the increase in year-over-year price growth in May was led by rising prices for shelter and passenger vehicles. Unlike March and April 2021, when most of the year-over-year gains in the CPI were characterized by the large upward base-year effects caused by price declines falling out of the 12-month movement, base-year effects affected the 12-month price movement for only a few key goods and services in May 2021. While prices began to recover in May 2020 from the initial pandemic-related declines, they remained below pre-pandemic levels. In May 2021, these lower prices were the basis for the year-over-year comparison, contributing to the 3.6% year-over-year increase in the CPI,” explained Stats Can in its report.
In May, the CPI edged up 0.4% on a seasonally adjusted monthly basis.
Over the last 12-month period, gas prices edged up at a slower rate in May than in April – 43.4% and 62.5%, respectively.
“Higher prices in May 2020, when gasoline prices began to recover from the initial impacts of the COVID-19 pandemic, were used as the basis for the year-over-year comparison, contributing to the slowdown in year-over-year growth. In May 2020, gasoline prices rose 16.9% month over month, recovering from March (-17.8%) and April (-15.2%), when both supply- and demand-related factors contributed to significantly lower prices at the gas pumps,” stated the agency.
Over the last month, the price of gas rose 3.2%.
Homeowners’ Replacement Cost Index
In May, the homeowners’ replacement cost index, which correlates to new home prices, increased 11.3% year-over-year – the most substantial percentage rise since 1987, reported the agency.
“Prices have risen year over year for 16 consecutive months, as prices for new homes continue to be influenced by shifting consumer preferences and higher construction costs,” said Statistics Canada.
Conversely, the Mortgage Interest Cost Index decreased 8.2% over the last 12-month span, being one of the main downward contributors to the CPI.
Statistics Canada released a statement regarding the COVID-19 pandemic and the Consumer Price Index.
“For more information about the impact of the COVID-19 pandemic on the Consumer Price Index (CPI) during the first year of the pandemic, please consult the research document entitled “The Consumer Price Index and COVID-19: A One-Year Retrospective,” published as part of the Prices Analytical Series (62F0014M). This publication explores the sources of pandemic-related price change and the ongoing impact of base-year effects on the headline CPI. Goods and services in the CPI that were not available to consumers in May because of COVID-19 restrictions received special treatments, which effectively removed their impact on the monthly CPI. The values for the following sub-indexes were imputed from the monthly change in the all-items index: travel tours, some components of spectator entertainment, recreational services, personal care services in some areas, and some components of use of recreational facilities and services in some areas. The price indexes for beer served in licensed establishments, wine served in licensed establishments and liquor served in licensed establishments were imputed in several regions, using the indexes to which consumers likely redirected their expenditures: beer purchased from stores, wine purchased from stores and liquor purchased from stores. Consistent with previous months affected by the COVID-19 pandemic, prices for suspended flights were excluded from the May CPI calculation because passengers were ultimately unable to consume them. As a result, select sub-components of the air transportation index were imputed from the parent index (air transportation). The details of these treatments from April 2020 to March 2021 are provided in technical supplements available through the Prices Analytical Series (62F0014M). Details and treatments for May 2021 are available upon request.”