Canada Economics: May CPI: A Story of Oil, Chips and Vegetables

Research evidence excerpt

Canada Economics: May CPI: A Story of Oil, Chips and Vegetables

Update

June 22, 2026 05:27 PM GMT

Morgan Stanley & Co. LLCMCanada Economics | North America Arunima Sinha

Global Economist

May CPI: A Story of Oil, Chips Arunima.Sinha@morganstanley.comMayank Phadke, CFA +1 212 761-4125

Economist

Mayank.Phadke@morganstanley.com +1 212 761-1531

and Vegetables

Key Takeaways

• Headline CPI accelerated to 3.2%Y in May from 2.8% in April, with the move

again led by energy prices. The near-term pace remains elevated, with

headline CPI running at 9.2% on a 3-month annualized basis, up from 7.5% in

April.

• Bank of Canada read-through: our view is that the BoC can look past the

headline overshoot so long as core inflation stays contained and excess

capacity in the economy persists.

• The inflation impulse broadened somewhat beyond gasoline, with CPI

excluding gasoline rising to 2.2%Y from 2.0%. However, the non-gasoline

pickup was concentrated in a narrow set of categories—air transportation,

travel tours, fresh fruit and vegetables, and computer equipment—rather

than broad demand-sensitive inflation.

• Core inflation remains contained. CPI-Trim was unchanged at 2.0%Y, while

CPI-Median was effectively unchanged at 2.1%Y. All-items excluding food and

energy rose only 1.7%Y, and its 3-month annualized pace remained close to

1.0%.

• Gasoline is still doing most of the work. Gasoline prices rose 33.2%Y,

contributing 1.3pp to headline CPI and adding roughly 19bp to the monthly

change in headline contribution. Public transportation also added to the

print, driven by air transportation, which contributed about 10bp to the

monthly change.

• We do not treat the May pickup as evidence of a demand-driven inflation

cycle. Gasoline and airfares reflect energy pass-through, fresh produce