Canada’s inflation rate has recorded its smallest increase in nearly two years.

The Consumer Price Index (CPI) slowed to 3.4 per cent in May compared to 4.4 per cent in April.

“This is the smallest increase since June 2021,” Statistics Canada said in its monthly report released Tuesday.

Officials said the slowdown was largely driven by lower year-over-year prices for gasoline resulting from a base-year effect.

Energy prices had risen substantially a year ago due to supply uncertainty surrounding Russia’s invasion of Ukraine.

Meanwhile, remained the largest contributor to the year-over-year CPI increase, rising 29.9 per cent in May.

“For the third consecutive month, this was the largest increase on record, as Canadians continued to renew and initiate mortgages at higher interest rates,” said StatCan.

Prices at the grocery store continue to rise much higher year over year than the overall inflation rate.

Grocery prices rose nine per cent in May, more than double the rate of inflation and nearly unchanged from the 9.1 per cent increase in April.

The highest year-over-year increases included edible fats and oils, bakery products and cereal products.

Prices for food purchased from restaurants rose at a slightly faster year-over-year pace in May at 6.8 per cent amid ongoing labour shortages, input costs and expenses.

The highest year-over-year increases among grocery items include edible fats and oils (+20.3%), bakery products (+15.0%) and cereal products (+13.6%).

Regional inflation numbers

Prices rose at a slower pace in May compared with April in all provinces, according to StatCan.

Price growth slowed more in Atlantic provinces, coinciding with lower prices for fuel oil and other fuels.

Saskatchewan (4.3 per cent), Quebec (4.0 per cent), British Columbia (3.4 per cent) and Manitoba (3.4 per cent) had the highest rates of inflation.

That was followed by Ontario (3.1 per cent), Alberta (3.1 per cent), New Brunswick (2.3 per cent), Nova Scotia (2.0 per cent), Newfoundland and Labrador (1.7 per cent) and Prince Edward Island (0.7 per cent).

You can view the full report by clicking here.