Canada saw a surge in its annual inflation rate, hitting 2.8% in April, as reported by Statistics Canada. This increase was mainly driven by the substantial rise in fuel prices. Energy costs skyrocketed by 19.2% compared to the previous year, with gasoline prices spiking even more at 28.6% due to global supply issues caused by the conflicts in the Strait of Hormuz and the shift to pricier summer gasoline blends.

The closure of the strait due to the U.S. and Israel’s tensions with Iran led to a global energy price hike. To mitigate the inflation, the government suspended the fuel excise tax in the middle of the month. The rise in energy prices also played a significant role in the inflation rate increase to 2.4% in March.

In another move affecting the comparison, Ottawa decided to eliminate the consumer carbon price a year earlier, which inflated the annual price comparison in April. This decision reduced gasoline prices by 18 cents per liter in April 2025. While this adjustment initially tempered the inflation rate, its absence in the current comparison contributed to pushing inflation higher.

Clothing and footwear prices also saw a 2% increase in April after a slight decline in March. Moreover, the data did not include the impact of rising airfare costs due to increased fuel prices, as those are recorded at the time of the flight rather than ticket purchase. It is anticipated that such pressures will be more evident in the upcoming summer inflation reports.

While fuel and energy costs soared, other sectors did not experience the same price hikes. Rents continued to rise but at a slower pace, with a national increase of 3.6% year-over-year, down from 4.2% in March. Food inflation decreased to 3.5% in April from 4% in March, with items like chicken, fresh vegetables, coffee, and tea seeing slower price increases.

Additionally, tour travel prices dropped by 11% in April after a previous 11.5% increase. Core inflation, which excludes volatile items like fuel and food, rose at a much slower rate than overall inflation. Analysts suggest that while energy prices may be influencing consumer spending habits, the softness in core inflation could provide relief to other sectors, potentially preventing a significant inflation surge.