BURST
B.C. recorded the highest inflation rate in Canada in May, according to new data released this week by Statistics Canada.
Inflation accelerated in six provinces at a faster pace last month compared to April, with B.C. leading the surge by posting the highest year-over-year price growth in the country at 2.3 per cent, according to the Consumer Price Index.
Economists point to steep property tax hikes, aggressive emissions-reduction policies, and an economy struggling to keep pace with population growth.
Read on for more about what’s driving inflation in B.C., and what economists say might be coming next.
Why is B.C. leading the country in inflation?
Three words: Cost of living.
B.C. has the highest housing costs and household debt in Canada, and as more homeowners renew mortgages at higher rates, the cost of living has spiked.
Economist Jock Finlayson, senior policy adviser at the Business Council of B.C., says the impact of mortgage renewals in B.C. is more severe than in other provinces.
“Many B.C. homeowners are renewing their mortgages at rates far higher than they locked in during 2020 or 2021,” said Finlayson. “This puts significant upward pressure on the shelter component of (the Consumer Price Index).”
Nationally, mortgage interest costs have risen by 61 per cent since January 2019. In B.C., that has been further amplified by high home values and large debt loads.
Shelter isn’t the only factor, according to the
report
.
Rising costs for food, recreation and education, including reading materials, are also fueling B.C.’s inflation.
What else is pushing inflation higher in B.C.?
David Williams, vice-president of policy at the Business Council of B.C., says municipal governments are also adding to B.C.’s inflation pressures.
Since January 2019, property taxes across the province have climbed by 43 per cent, nearly double the national average of 22 per cent, according to the council’s analysis.
Williams said as local governments expand services or take on new projects, they need more revenue to cover the costs — revenue that often comes from taxing property owners.
“Spending by municipalities across B.C. has been prolific,” he said.
Is B.C.’s economy keeping up with its population growth?
In 2024, B.C.’s population grew by three per cent. “That means three per cent more customers and workers to potentially grow the economy,” said Williams. But the province’s economy expanded by just 1.2 per cent.
“That means more people but slower production of goods and services,” added Williams.
In recent years, the economist notes, more British Columbians have been leaving the province, according to Statistics Canada’s quarterly population highlights.
“We’re seeing net 5,000-10,000 people leaving B.C. each year for other provinces. We haven’t seen numbers like that since the late 1990s.”
How is government policy playing into this?
One factor economists are watching closely is CleanBC, the province’s climate action strategy aimed at sharply reducing domestic emissions by 2030.
The climate-action plan includes 25 policy interventions that touch nearly every sector of the economy, including the low-carbon fuel standard, stricter building energy standards, electric vehicle sales mandates, and caps on industrial emissions that effectively limit production.
While these measures are designed to reduce domestic emissions, economists like Williams say they also intentionally slow down the production of goods and services in the economy.
“It’s like driving the economy with a handbrake,” he said.
What about external risks, like U.S. tariffs?
Williams warns that upcoming U.S. tariffs could further weigh on B.C.’s already slowing economy.
“We could see them cause the economy to contract over 2025 and 2026,” he said, noting that with 54 per cent of B.C.’s exports destined for U.S. markets, B.C. is vulnerable to cross-border measures targeting exports such as energy and manufactured goods.
A recent Bank of Canada report cited in the latest Consumer Price Index supports Williams’ concern. It warns that U.S. tariffs, especially if met with Canadian retaliation, could push up consumer prices, slow business investment and lead to a long-term decline in Canada’s economy.
The January 2025 report says the impact would be felt most in industries like automotive and resource extraction, where parts cross the border multiple times and face repeated taxation.
Will inflation in B.C. stay high?
Williams believes B.C.’s economic challenges won’t ease anytime soon.
He noted that the province’s economy, once buoyed by major infrastructure projects like LNG Canada and Coastal GasLink, has slowed significantly since 2022 as those projects wrapped up.
While inflation may ease as interest rates fall, Williams says underlying pressures, especially in housing and taxation, are likely to persist.
“We may be unfortunately staring down a barrel of four consecutive years of a shrinking economy in population-adjusted terms,” Williams said.