The rate appears unusually high because May 2020 marked the economy's low point, but things are heating up.
Canada's inflation rate increased to 3.6 percent in May, the highest rate in a decade. According to the data agency, the cost of nearly everything is increasing at a much faster rate than usual, from housing and vehicles to food, energy, and consumer goods.
The cost of shelter increased by 4.2 percent in the year to May, the highest annual increase since 2008. Additionally, the cost of furnishing a home with furniture and appliances increased by 4.4 percent. That is the fastest rate of growth since 1989 for so-called durable goods.
Furniture prices, in particular, increased by 9.8 percent last year, the highest annual increase since 1982. The government imposed tariffs of up to 300 percent last month on certain types of upholstered furniture imported from China and Vietnam.
Gasoline prices have increased by 43% in the last year, a figure that appears especially high when compared to May of last year, when both demand and prices for gasoline fell precipitously. However, even on a monthly basis, gasoline prices increased by 3.2 percent in May compared to April levels.
Not only is gasoline becoming more expensive, but the cost of new cars has increased by 5% in the last year. This is the largest increase in vehicle prices since 2016, and the primary reason is a continuing shortage of semiconductors, a global trend that has driven up the cost of everything that uses microchips.
Additionally, the cost of traveler lodging increased by 6.7%. This is the highest rate recorded since the pandemic began, when demand for hotel accommodations plummeted.
Economists had anticipated a strong inflation reading, with a Bloomberg poll of economists predicting a rate of around 3.5 per cent.
However, inflation was even higher, indicating that Canada's economy is finally revving up after stalling during COVID-19.
"We've passed the point of no return," TD Bank economist James Marple stated. "Inflation is raging in Canada."
While Canada's inflation rate is undeniably high, it is not as high as the rate in the United States, where the cost of living increased at an annual rate of 3.8 percent last month.
Massive leap from a low bar
While the annual price increases are staggering, economist Avery Shenfeld of CIBC notes that it's important to remember that May's figures are being compared to the situation in May 2020, when virtually every sector of the economy was in the doldrums.
"Prices appear to be higher than they were a year ago, but that is because prices were at rock-bottom levels a year ago... during the first wave of COVID," he explained in an interview with CBC News. "Relative to where prices were in the spring of 2019, we haven't seen much inflation."
If persistently high inflation persists, the Bank of Canada may be forced to intervene with higher rates, but Shenfeld is not concerned that the current bout of inflation will cause permanent damage.
"Canadians will find a few items slightly more expensive, but we've also just come off a year in which we didn't spend nearly as much of our income, so there's a lot of purchasing power in the hands of the average Canadian."