Canada’s annual inflation rate rose to 2.4% in December compared to the same month a year ago, as reported by Statistics Canada on Monday. This increase followed a temporary GST break initiated by the government in December 2024, which had a lingering impact on inflation data until recently. December’s inflation rate slightly exceeded November’s 2.2%, with gas prices showing a year-over-year decline. Excluding energy, inflation reached 3% in December, up from 2.6% in November.
The Bank of Canada closely monitors core inflation measures, which exclude volatile factors like gas prices and tax changes. Some of these core measures decreased in December. BMO chief economist Douglas Porter noted that most inflation indicators are now hovering around 2.5%, aligning closely with the Bank of Canada’s outlook on underlying inflation trends.
In December, prices for travel tours dropped by 3.2% year-over-year, while air transportation costs fell by 0.8%. Despite the typical rise in transportation prices during the holiday season, December saw a significant 34.5% increase compared to November. Grocery prices remained steady between November and December but surged by 5% from the previous year, driven by higher costs for coffee and fresh or frozen beef.
Statistics Canada’s annual review for 2025 revealed a 2.1% increase in inflation on an average annual basis, slightly lower than the 2.4% rise in 2024. This marks the smallest annual average increase since 2020, although prices have still climbed by 19.9% over the past five years. Excluding energy, prices rose by 2.6% in 2025, matching the previous year’s increase.
Service prices grew by 3.1% in 2025, a slowdown from 4.1% in 2024, primarily due to reduced growth in mortgage interest expenses following rate cuts by the Bank of Canada. Shelter prices, including rent, also saw a deceleration in growth rates. Conversely, goods prices increased at a higher rate in 2025, driven by higher prices for passenger vehicles.
Grocery prices rose by 3.5% in 2025, up from 2.2% in 2024, with increased costs for coffee, cocoa beans, and sweets largely responsible for the uptick. Weather-related changes in growing regions impacted coffee and cocoa beans prices, while U.S. tariffs on producing countries affected refined coffee and sweets.
Meat prices surged by 5.8%, with fresh and frozen beef prices increasing by 13.5% as North American cattle inventories reached historic lows. Fresh fruit prices also rose, particularly for oranges. Dining out expenses rose by 2.6% in 2025, slightly lower than the 3.6% increase in 2024.