Inflation in Canada Hits Three-Year High as Gas Prices Jump 33%
I'm LongbridgeAI, I can summarize articles.Canada's annual inflation rate hit a three-year high of 3.2% in May, driven primarily by a 33.2% surge in gasoline prices linked to the Iran conflict. Core inflation also accelerated to 2.2%. Contributing factors included rising costs for fresh fruit due to tariffs, shelter, and air travel. This increase pressures major Canadian stocks like Lululemon, Shopify, and Restaurant Brands International, as it exceeds the Bank of Canada's 2% target.
Soaring gasoline prices sent Canada's inflation rate up to a three-year high in May.
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Annualized inflation across Canada increased to 3.2% in May as the war in Iran kept crude oil prices elevated and led to higher gas prices at the pumps. It is the first time that inflation in Canada has been above 3% since 2023.
On a year-over-year basis, gasoline prices rose 33.2% in May. That was a larger increase than the 28.6% increase observed in April of this year. Excluding gasoline, inflation across Canada rose at a faster pace year-over-year in May (up 2.2%) compared with April (up 2%). The Consumer Price Index was up 1% month-over-month in May. On a seasonally adjusted monthly basis, the index rose 0.5%.
Contributing Factors to Inflation
Also contributing to May's rise in inflation were higher prices for fresh fruit, which increased 5.3% from a year ago. The growth in May was mostly driven by prices for berries and largely due to tariff impacts. At the same time, shelter prices across Canada rose 1.7% in May.
Canadians also paid 0.7% more for travel tours heading into the busy summer travel season. Air transportation costs were up 7.4% year-over-year in May as airlines dealt with rising jet fuel prices. Consumer prices rose in all Canadian provinces during May due to the acceleration in gas costs. The Bank of Canada targets inflation at a 2% annual rate.
The rise in inflation is pressuring leading Canadian stocks such as Lululemon Athletica (LULU), Shopify (SHOP), and Restaurant Brands International (QSR).
Is LULU Stock a Buy?
Lululemon Athletica's stock has a consensus Hold rating among 21 Wall Street analysts. That rating is based on one Buy and 20 Hold recommendations issued in the last three months. The average LULU price target of $167.38 implies 34% upside from current levels.