Higher auto insurance premiums, gas prices and grocery costs pushed Alberta’s inflation rate above the national average in May. Statistics Canada reported Tuesday that Alberta’s Consumer Price Index rose 3.7 per cent year over year, compared with 3.2 per cent nationally. National inflation rose from 2.8 per cent in April, with energy prices driving much of the increase across the country. Mark Parsons, chief economist with ATB Financial, says Alberta faced many of the same pressures as other provinces, but auto insurance — which have spiked 26 per cent year over year in Alberta — helped push the province’s rate higher than the national average. “(That’s) enough to push Alberta’s inflation rate higher temporarily than the rest of the country,” Parsons told CTV News. “Don’t expect that to persist, because the government is introducing measures to cap those rates for good drivers.” Across Canada, gasoline prices rose 33.2 per cent year over year, driven by supply concerns related to war in the Middle East and shipping disruptions in the Strait of Hormuz. Concordia University economist Moshe Lander says Canadians should view the national increase in that context. “I think the vast majority of that increase was due to gasoline prices, which was fairly obvious given what people are seeing at the pump,” Lander said. Lander says the Bank of Canada, which is due to share its next interest rate decision next month, is unlikely to react strongly to one month of inflation driven largely by volatile prices such as fuel. “I don’t imagine the Bank of Canada’s even going to bat an eye at this,” Lander said. “What the Bank of Canada is looking for when they’re deciding whether to increase interest rates is not the actual inflation number itself, but a variety of other things, one of which is core inflation.” Lander says food and oil prices remain two of the most volatile components in the inflation calculation. Inflation moves closer to the Bank of Canada’s target when economists strip those items out. Still, both economists say consumers feel higher prices most in everyday purchases. Food purchased from stores rose 4.3 per cent year over year, marking the 16th consecutive month grocery inflation outpaced the overall inflation rate. Fresh fruit prices rose 5.3 per cent year over year, while fresh vegetables rose nine per cent. Statistics Canada attributed those increases to reduced supply and higher fuel costs. Lander says grocery inflation remains a “legitimate concern” for households. “I’m not going to deny that,” he said. Parsons says many households continue to feel the effects of prices that rose sharply during the pandemic and continued to grow at “a slower rate.” “People feel price levels, they don’t feel … price growth as much. And what Canadians are feeling … when they go to the grocery store or they fill up their tanks is (that) everything’s expensive,” Parsons said. Housing costs, meanwhile, offered some relief as national shelter inflation slowed to 1.7 per cent in May from 1.8 per cent in April. Rent inflation eased, and mortgage interest costs continued to decline. Parsons says the Bank of Canada will watch whether higher energy prices spread into the wider economy. “The longer this carries on, the harder it is for these energy prices not to spill over into other items that depend on energy,” he says. The Bank of Canada will make its next interest rate decision on July 15. For now, Parsons says ATB expects the central bank to remain on hold because the Canadian economy is too weak for increased interest rates and inflation is too high to lower them.
