Statistics Canada’s office building. (CC BY-SA 3.0)
Canada’s inflation rate slowed to 1.7 percent in April, driven by lower energy prices following the removal of the consumer carbon tax, according to Statistics Canada.
The country’s inflation rate was at 2.3 percent in March. It fell in April due to a combination of lower energy prices from the carbon tax’s removal, decreased oil demand due to U.S. tariffs, and increased oil supplies from the Organization of the Petroleum Exporting Countries, StatCan says.
Energy prices fell 12.7 percent in April following a 0.3 percent decline in March. Year over year, natural gas prices fell 14.1 percent in April after a 6.4 percent gain in March.
While energy prices pushed inflation down in April, food prices grew at a faster pace, rising 3.8 percent year-over-year compared to 3.2 percent in March. The largest contributors to the food price increases were items such as fresh vegetables (3.7 percent), beef (16.2 percent), coffee and tea (13. 4 percent), and sugar (8.6 percent). This marks the third month in a row that grocery price increases have outpaced the overall inflation rate.
Restaurant food also rose at a faster pace in April, coming in a 3.6 percent compared to 3.2 percent in March. Canada imposed 25 percent tariffs on some U.S. food products during the trade war in March, such as poultry, beef, dairy, coffee, fruit, and sugar.
Loblaws recently warned that Canadians will see tariff-related price increases at its stores as its pre-tariff inventory runs out, and that up to 6,000 products will be impacted by U.S. tariffs over the next two months.
Shortly after taking office on March 14, Prime Minister Mark Carney signed a directive for the consumer carbon tax rate to be cut to zero. The carbon tax came into effect in 2019 at $20 per tonne, and was set to increase until reaching $170 per tonne in 2030.
When removing the consumer carbon tax, Carney said the move would “make a difference to hard-pressed Canadians.“ He previously said the carbon tax had become ”too divisive” among Canadians.
In commenting on the news of the inflation rate drop on social media, Conservative Leader Pierre Poilievre said though the suspension of the carbon tax had brought down inflation, grocery prices were again rising as “money-printing deficits continue pushing prices higher.”
Poilievre and the Conservatives repeatedly called for the carbon tax to be removed throughout 2023 and 2024, arguing that it was raising the cost of food, fuel, and heating.
In April, the Bank of Canada said the removal of the consumer carbon tax would temporarily reduce Canada’s inflation rate by around 30 percent, lowering the consumer price index by about 0.7 percentage points.
Carney has said he will replace the carbon tax with a new “consumer carbon credit market” integrated into Canada’s industrial pricing system, which will reward Canadians for making lower-emission choices while making “big polluters pay” for those incentives.
A recent TD Canada report on the Consumer Price Index warned that while analysts expected the inflationary impacts of the U.S. tariffs would begin hitting Canadians in the second quarter of the year, “the jump in April suggests this could be happening sooner than expected.”
The report said the jump in food inflation is a “setback” for the Bank of Canada and “complicates” its path forward on monetary policy. The Bank held its core interest rate steady at 2.75 percent in April due to uncertainty around U.S. tariffs, but TD Bank said it expects there will be two more rate cuts this year due to a slowing labour market and Ottawa offering a temporary reprieve on some tariffs.
Matthew Horwood is a reporter based in Ottawa.