Canada’s inflation climbs to 2.4% in December as last year’s GST break drops out of data; grocery and travel prices show mixed trends.
Inflation Inches Up as GST Break Drops Off
Canada’s annual inflation rate ticked up to 2.4% in December, according to Statistics Canada, as last year’s temporary GST break faded from the numbers. The small surge follows November’s 2.2% rise, showing how last December’s government tax cut continues to ripple through economic data.
The GST break, which ran from Dec. 14, 2024, for two months, lowered prices temporarily. Once its impact disappeared from year-over-year comparisons, price growth naturally edged higher.
Energy Costs Offset Some Price Gains
Although headline inflation rose, falling gas prices helped offset the increase. Excluding energy, core inflation climbed 3% in December, up from 2.6% in November.
Bank of Canada officials focus on core inflation measures, which remove volatile items like fuel or temporary tax cuts. Two of these measures actually fell in December, suggesting underlying price pressures remain moderate.
“After a year of wide fluctuations, most inflation indicators now hover near 2.5%, in line with the Bank of Canada’s expectations,” noted BMO chief economist Douglas Porter.
Travel and Grocery Prices Show Mixed Trends
Some categories bucked the broader trend: travel tours fell 3.2%, while airfare dropped 0.8% compared to last December. Yet holiday transportation costs jumped 34.5% from November, reflecting the seasonal spike.
Grocery prices held steady month-over-month but were 5% higher than last December, driven by coffee and beef costs. Weather-related issues in growing regions and U.S. tariffs on cocoa and sweets added to the grocery price climb.
Annual Inflation Slows but Prices Remain Up
Looking at the full year, Statistics Canada reported that average annual inflation in 2025 was 2.1%, down from 2.4% in 2024—the smallest increase since 2020. Still, prices rose nearly 20% over the last five years.
Services: Prices grew 3.1%, slower than 2024’s 4.1%, largely due to mortgage interest easing after Bank of Canada rate cuts.
Goods: Prices grew faster, with passenger vehicles pushing up durable goods costs.
Meat: Prices rose 5.8%, with fresh and frozen beef up 13.5% amid low North American cattle inventories.
Eating out: Restaurant prices increased 2.6%, slightly lower than 2024’s 3.6%.
Porter emphasized that while headline inflation is slightly above expectations, the softening in core measures means the Bank of Canada is unlikely to change its policy stance soon.
