Data Flashes

The Bottom Line:

Canadian inflation accelerated sharply in April, though less than expected, driven primarily by higher gasoline prices and fading favourable energy base effects. April marked the first month in a year that annual energy price growth was no longer being artificially dampened by the removal of the consumer carbon tax in April 2025, adding further upward pressure to headline readings.

The increase in headline inflation, however, continues to overstate underlying price pressures. Much of the strength in April reflected energy-related effects rather than a broad-based reacceleration in inflation across the basket. Excluding food and energy, price growth remained considerably more contained, while core inflation measures were broadly stable and continued to point to easing underlying inflation momentum.

Measures of core inflation, including CPI-trim and CPI-median, averaged 2.1% year-over-year in April compared with 2.3% in March. That leaves core inflation running well below levels seen through much of last year and broadly consistent with gradually moderating domestic demand conditions.

The report is consistent with our broader view that higher oil prices will lift headline inflation and cut into household purchasing power but are unlikely to reignite systemic inflation pressures. While some categories, particularly food and shelter, continue to contribute disproportionately to inflation, broader price pressures are easing alongside soft labour market conditions.

Upside inflation risks could build the longer energy prices remain at elevated levels, but overall the April data support our base case that the Bank of Canada will remain on hold for the remainder of 2026.

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The details:

• Headline CPI rose 0.3% m/m seasonally adjusted in April, lifting the annual rate to 2.8% from 2.4% in March, below both our own and market expectations.

• Energy was the primary driver, with gasoline up 28.6% year-over-year and contributing significantly to the headline figure amid higher global oil prices tied to the ongoing Middle East conflict.

• Core measures continued to edge lower. Both the trim and median core measures slowed on a year-over-year basis (to 2.0% and 2.1%, respectively) on a subdued 0.1% month-over-month (seasonally adjusted) increase for trim and 0.2% monthly increase in the median measure.

• The “supercore” measure (trim services excluding shelter) stood at 1.7% on a three-month rolling average basis, while the year-over-year reading came in at 2.4%, down from 2.7% in March and marking the lowest rate since March 2021.

• The breadth of inflation pressures remained contained. The share of CPI basket components growing faster than 3% was 34% in April, little changed from March, while the share growing at more than 5% was 20%. The diffusion index continues to point to easing underlying momentum.

• Food price growth ticked lower but remained elevated at 3.5% year-over-year, continuing to contribute disproportionately to overall growth. Groceries came in at 3.8%, down from 4.4% in March, while dining out was little changed at 3.1%.

• Shelter costs ticked slightly higher to 1.8%, though rent and mortgage interest both saw continued moderation on a year-over-year basis.

• Services decelerated in April and showed further signs of easing, while goods prices stayed comparatively volatile outside of energy-related and grocery categories.

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About the author:

Abbey Xu is an economist at RBC. She is a member of the macroeconomic analysis group, focusing on macroeconomic forecasting models and providing timely analysis and updates on economic trends.

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