Canada’s annual inflation rate rose to 2.4% in December, edging above expectations as the impact of a temporary federal tax holiday a year earlier dropped out of the annual comparison, Statistics Canada data showed on Monday.
The increase followed a 2.2% reading in November and compared with expectations in a Reuters poll of economists for inflation to hold steady at 2.2%.
Statistics Canada said the acceleration in the all-items Consumer Price Index (CPI) was largely driven by base-year effects tied to the federal government’s Goods and Services Tax and Harmonized Sales Tax (GST/HST) break, which began in December 2024. Prices for items exempted under the tax holiday fell at the time, but those declines are no longer reflected in the year-over-year calculation, pushing headline inflation higher.
Offsetting some of the upward pressure, gasoline prices fell 13.8% from a year earlier, a sharper decline than November’s 7.8% drop. Excluding gasoline, the CPI rose 3% year over year in December, up from 2.6% the previous month.
On a monthly basis, the CPI fell 0.2% in December, while the seasonally adjusted measure rose 0.3%.
Restaurant prices were the largest contributor to faster annual inflation, with food purchased from restaurants up 8.5% in December, compared with a 3.3% increase in November. Prices for alcoholic beverages also accelerated, while toys, games and hobby supplies, as well as children’s clothing, posted stronger gains after declines or slower growth a month earlier.
Food purchased from stores rose 5% year over year, unchanged on the month. Statistics Canada said coffee prices climbed more than 30% from a year earlier, while fresh or frozen beef prices rose 16.8%.
Energy prices continued to weigh on inflation. Statistics Canada pointed to a global oversupply of crude oil that pushed oil prices to their lowest levels in more than four years, contributing to the steep decline in gasoline prices.
Elsewhere, prices for air transportation fell 0.8% from a year earlier, a smaller decline than in November, though they jumped 34.5% month over month amid the holiday travel season. Travel tour prices declined 3.2% annually but rose on a monthly basis, driven by higher prices for US destinations.
The December inflation report is the Bank of Canada’s final reading on consumer prices before its first interest rate decision of the year next week. The central bank held its benchmark interest rate steady at 2.25% in December.