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Second Month of Deflation Since 2009

Ottawa, June 17, 2020—The Conference Board of Canada’s Economist Anna Feng offers the following insights on today's Consumer Price Index (CPI) data:

“Consumer prices were off their year ago level (-0.4 per cent) again in May, recording the second month of deflation since 2009. The Bank of Canada’s preferred measure of core inflation decelerated to just 1.4 per cent, well below the Bank’s 2.0 per cent target. Depressed oil prices combined with suppressed household demand for discretionary spending contributed to May’s deflation. As such, we expect that inflation will continue falling behind the Bank’s 2.0 per cent target for the rest of 2020.”


  • The Consumer Price Index was down 0.4 per cent in May following a 0.2 per cent decline in April (year-over-year). This is the second month of negative price growth since 2009.
  • All three measures of core inflation dropped last month. CPI-Common (the Bank’s preferred measure) nudged down to 1.4 per cent, the lowest of the three measures. The average of the three core inflation measures sat at 1.7 per cent last month, 0.3 per cent below the Bank’s 2.0 per cent target.
  • As a result of oil production cuts by the OPEC and their allies (Russia and Mexico) in May, gasoline prices were up by 16.9 per cent (monthly) after two months of declines. However, despite the monthly increase, oil prices were still 29.8 per cent lower than one year ago. As such, gasoline prices were the number one source of deflationary pressure in May. Excluding gasoline, CPI inched up 0.7 per cent in May, sharply down from 1.6 per cent in April.
  • Mortgage interest rates declined 0.1 per cent in May compared to April, the first drop since July 2017. This is a result of the Bank of Canada’s interest rate cuts and dwindling bond yields.
  • Food prices continued to exert upward pressures on CPI. Meat prices increased 7.8 per cent on a year-over-year basis as COVID-19 outbreaks led to closures at several meat processing plants.
  • Overall, a sharper drop in prices in May reflects the deep recession we are in and the current lack of demand in the economy as well as the oil price shock on consumer prices. Only four essential CPI components out of eight saw an increase in their prices last month: food; shelter; health and personal care; and alcohol, tobacco and cannabis. This is in line with our expectations of a surge in household demand for essential goods while households remain cautious about discretionary spending. As the economy will take months to recover, inflation is expected to continue falling behind the Bank’s 2.0 per cent target for the rest of this year.


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Content Attribution:

Anna Feng


The Conference Board of Canada



Michelle Rozon





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