Canada’s annual inflation rate surged to 2.8 percent in April, driven significantly by escalating fuel costs, as reported by Statistics Canada. Energy prices experienced a substantial 19.2 percent year-over-year increase in April, following a 3.9 percent uptick the previous month. Gasoline prices, in particular, soared by 28.6 percent year-over-year due to the disruptions in the supply chain caused by the conflict in the Strait of Hormuz and the transition to pricier summer gasoline blends.
The closure of the strait due to tensions involving the U.S., Israel, and Iran played a pivotal role in driving up global energy prices. To mitigate the April price surge, the federal government temporarily suspended the fuel excise tax midway through the month. The hike in energy prices was also a key factor in March’s inflation rate climb to 2.4 percent.
In a move that distorted the annual comparison, Ottawa’s decision to eliminate the consumer carbon price earlier than planned raised prices in April. Removing the carbon price slashed approximately 18 cents off the per-liter gas cost in April 2025. While this reduction initially dampened the inflation rate over the past year, its absence from the annual comparison now pushed inflation higher rather than lowering it.
Clothing and footwear prices rebounded by two percent in April after a 0.4 percent dip in March. CIBC senior economist Andrew Grantham highlighted that rising airfare prices linked to surging fuel expenses were not reflected in the April inflation data, as these transactions are recorded when the flight is taken, not when tickets are purchased. He anticipates these pressures to manifest more prominently in summer inflation reports.
While gas and energy prices soared, other sectors experienced varying price movements. Rents across the country climbed at a slower pace, with a 3.6 percent year-over-year increase compared to 4.2 percent in March. National food inflation softened to 3.5 percent in April from four percent in March, with items like chicken, fresh vegetables, coffee, and tea witnessing slower price hikes after sharp increases earlier in the year.
Furthermore, tour travel prices declined by 11 percent in April following an 11.5 percent rise in the previous month. BMO chief economist Doug Porter highlighted that core inflation, excluding volatile items like fuel and food, rose at a much slower rate than overall inflation. Porter emphasized that aside from gasoline and groceries, inflation remained subdued, potentially indicating that rising energy costs might be prompting consumers to save rather than spend, influencing disinflationary trends in other sectors.
Grantham suggested that the subdued core inflation could alleviate inflationary pressures in other industries, thereby mitigating the impact of rising gas prices on overall inflation rates.
