Canadian CPI miss expectations in May. USD/CAD rally 70 pips after the news

The Consumer Price Index (CPI) rose 1.3% on a year-over-year basis in May, following a 1.6% gain in April.

Overall, energy prices rose less year over year in May than they did in April, with the year-over-year growth rate in gasoline prices slowing to half of what it was the previous month. Declines in food prices continued to moderate.

Excluding food and energy, the CPI was up 1.4% on a year-over-year basis in May, after posting a 1.5% increase in April.

Prices were up in six of the eight major components in the 12 months to May, with the shelter and transportation indexes contributing the most to the year-over-year rise in the CPI. The clothing and footwear index and the food index declined on a year-over-year basis.

Shelter costs grew 1.9% in May on a year-over-year basis, after increasing 2.2% in April. This deceleration was led by the electricity index (-5.5%), which declined year over year for a fifth consecutive month. On a monthly basis, electricity prices were down 3.3% in May, led by declines in Ontario. On a year-over-year basis, the natural gas index rose less in May than in April. Conversely, homeowners' replacement costs were up more in May (+4.4%) than in April (+3.9%).