Canada’s annual inflation rate climbed to 2.8 percent in April, driven significantly by surging fuel prices, as reported by Statistics Canada. Energy costs surged by 19.2 percent year-over-year in April, following a 3.9 percent increase in the previous month. Gasoline prices specifically rose by 28.6 percent year-over-year due to supply disruptions in the Strait of Hormuz and the shift to more expensive summer gasoline blends.
The conflict between the U.S., Israel, and Iran has led to the closure of the strait, causing a global increase in energy prices. The temporary suspension of the fuel excise tax by the federal government in mid-April helped temper the rise in prices for the month.
The spike in energy prices was also a key factor behind the inflation increase to 2.4 percent in March. Ottawa’s decision to eliminate the consumer carbon price earlier than planned distorted the annual price comparison in April.
The removal of the carbon price reduced gasoline costs by about 18 cents per liter in April 2025. While this adjustment initially dampened the inflation rate over the past year, it no longer factored into the annual comparison, contributing to a higher inflation rate.
In addition to energy costs, clothing and footwear prices rose by two percent in April after a 0.4 percent decline in March. Rents continued to rise but at a slower pace, with a national increase of 3.6 percent year-over-year. Food inflation eased to 3.5 percent in April, down from four percent in March, with items like chicken, fresh vegetables, coffee, and tea experiencing slower price increases.
Travel tour prices fell by 11 percent in April, following an 11.5 percent increase in the previous month. Core inflation, which excludes volatile items like fuel and food, increased at a slower rate compared to overall inflation. Economists suggest that the softness in core inflation could help offset rising energy costs in other sectors, potentially preventing a significant rise in inflation.
CIBC’s senior economist, Andrew Grantham, highlighted that the inflation data for airfares did not fully capture the impact of rising fuel costs, as these transactions are recorded when flights are taken, not when tickets are purchased. Grantham anticipates increased pressure from these costs in the upcoming summer inflation figures.