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TOP STORY
Inflation Jumps to 3.2% on Oil Shock — But the Core Stays Tame
Canadian inflation accelerated to a 29-month high of 3.2% year over year in May, up from 2.8% in April, driven almost entirely by energy. Statistics Canada pinned the spike on gasoline (+33.2% y/y), with the closure of the Strait of Hormuz keeping pump prices at their highest since June 2022. For B.C. and Alberta contractors, that’s the number that bites: every sustained move in crude flows straight into diesel, asphalt, and the cost of hauling material to site. The reassuring news is underneath the headline — CPI excluding food and energy ticked up only to 1.6%, and the Bank of Canada’s preferred core measures held near 2%. RBC calls the run-up “narrowly based,” with a weak economy limiting any pass-through to broader prices. Bottom line: an import-driven oil shock, not a domestic demand problem — and not enough to force the Bank’s hand.
THE NUMBERS — STATISTICS CANADA
Shelter & Computer Equipment — Shelter inflation eased again to 1.7%, with rent growth (+3.5%) at its lowest since January 2022 and mortgage interest costs falling for a second straight month. Meanwhile computer equipment rose 3.9% — the first y/y gain since 2020 — as AI data-centre demand drives up RAM and SSD prices. Statistics Canada
FROM THE ECONOMISTS
ICBA Economics (Jock Finlayson) — Navigating Choppy Waters: ICBA Economics’ Mid-Year Update — With Canada in or near recession after two straight quarters of contraction, ICBA pegs 2026 national growth at just 0.5–0.8% and CPI at 2.7%. The provincial split is stark: Alberta powers ahead at 2.5% on record oil output and surging in-migration, while B.C. stalls at 0.6%, dragged down by a forestry slump, shrinking population, and a sharp drop in residential construction. Housing starts rise only modestly nationwide, with the weakness concentrated in B.C. and Ontario.
RBC Economics — Energy drives Canada’s inflation to 3.2% as underlying pressures stay contained — Abbey Xu: the report “remains heavily influenced by energy prices” while underlying trends move in line with the BoC’s target. Limited evidence oil costs are spilling into broader prices.
TD Economics — Canadian Consumer Price Index — Leslie Preston: “We expect May to mark the peak for headline inflation this year,” citing the oil pullback after a tentative Iran–US ceasefire. Apart from energy and some tech prices, inflation remains “very well behaved.”
WORTH WATCHING
BoC Next Decision — July 15 — After five straight holds at 2.25%, no economist surveyed sees the May inflation spike as enough to move the Bank. With the economy in a technical recession and core near target, a hold looks locked in.
Tariff Cliff — July 24 — Washington’s 10% Section 122 surcharge on non-CUSMA-compliant Canadian goods is set to expire around July 24 unless extended. That sits on top of 50% steel and aluminum duties and a 10% softwood charge — the costs landing hardest on construction.