May 16, 2023

May 2023 CPI: Canada’s inflation surprisingly edges up, breaking its chilly streak

Breaking an 8-month streak of cooling, Canada’s headline inflation edged up to 4.4%. This was higher than market expectations which predicted another drop from March’s 4.3%. The acceleration in this report came by way of an increase in gas prices, rent and mortgage interest rate costs. As it continues to hold its policy rate at 4.5%, this surprising report will keep the Bank of Canada on greater alert, as we await its next announcement in early June.

Marwa Abdou, Senior Research Director, Canadian Chamber of Commerce



  • Canada’s headline CPI inflation edged up to 4.4% year-over-year in April. This broke an almost three-quarter streak of cooling down from headline peak 8.1% last summer. The slowdown in headline inflation was well above market expectations (4.1%).
  • On a month-over-month basis, the CPI rose by 0.7% in April (compared to the 0.5% increase in March).

CPI Components

  • One bright spot in this report is that the spread of inflation continues to narrow across goods and services. Price increases for goods rose to 4.0% in April from 3.6% in March, whereas those in services declined to 4.8% from 5.1% a month prior. Still, it’s important to note that all but transportation prices (1.3% up from 0.3%) in the CPI basket are seeing inflation above the BoC’s 1% to 3% target range.
  • Another glimmer of light is that grocery (+9.1% yr/yr from 9.7% in March) and food prices (8.3% from +8.9% March) have finally started to loosen their grip on consumers’ wallets.
  • The largest contributor to the acceleration of this month’s headline number, gasoline rose prices in April by 6.3% – the largest m/m increase since October 2022. This surge in prices followed OPEC+’s April announcement representing the largest cut since the start of the pandemic and equivalent to 2% of global oil demand.
  • While mortgage costs were up by almost 29% yr/yr from April 2022, Canadians are seeing shelter costs decelerate a little – 4.9% yr/yr from 5.4% from last month.
  • Average hourly wages are still heating up past annual inflation rate at 5.2% in April. Wage growth has exceeded inflation over the past quarter – a pattern we’ve been avoiding for two years but something that will keep analysts watching for a wage-price spiral.


Bank of Canada

  • If there is another positive glimmer in healing an additional policy rate hike in early June, it’s that we saw the BoC’s two “core inflation” measures continue to soften to 4.2% vs. 4.5% in March. Progress in these measures remains mission critical to declaring victory in the fight against inflation.
  • The Bank expects inflation to dramatically step down to the 3% target range next month. That said, with shorter-term (three-month annualized) core inflation still running above 3.5%, the Bank will be thinking hard about whether additional rate hike(s) are needed to fully bring inflation under control.



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