The Consumer Price Index (CPI) fell 0.4 per cent on a year-over-year basis in May, down from a 0.2 per cent decline in April, according to data released Wednesday by Statistics Canada.

Excluding gasoline, the CPI rose 0.7 per cent, the smallest increase since January 2013, said the federal agency.

“Prices rose in four of the eight major components on a year-over-year basis. Transportation prices contributed the most to the decline in the CPI, mainly because of lower gas prices compared with May 2019. Food prices (+3.1 per cent) remained high in May, with the largest year-over-year increase among the major components,” it said.

“Gasoline prices rose 16.9 per cent on a month-over-month basis in May after falling significantly in April (-15.2 per cent) and March (-17.8 per cent). Rising global demand for oil and gas drove the increase in May, as many countries started to ease restrictions that were put in place in response to the COVID-19 pandemic. In addition, major oil-producing countries agreed to cut production starting May 1, and this contributed to the rise in prices by limiting supply. Despite the monthly increase in May, prices for gasoline were 29.8 per cent lower compared with May 2019 and remained below the price level observed in March 2020.”

The CPI in Alberta decreased 0.5 per cent on a month-over-month basis but was up 0.1 per cent year-over-year.

“The weakness in May was broad based outside of fuel costs. Food prices rose, but less than expected given the depreciation in the Canadian dollar and issues with the food supply chain. The pandemic’s effects on the housing market also showed up in the report, with shelter prices falling. Statistics Canada noted the impacts on rent prices from employment losses and restrictions on short-term rentals. But mortgage interest costs also declined as banks lowered rates in conjunction with falling bond yields and a lower Bank of Canada policy rate. Consumers received a break from cell phone service providers which offered special incentives for both prices and usage in May. The clothing and footwear category was again also under pressure during the month,” said Royce Mendes, an economist with CIBC.