Canada’s official inflation rate slowed for the third month in a row in September, even as many goods and services continued to get more expensive.
Statistics Canada reported Wednesday that the consumer price index declined to 6.9 percent in September, down from seven percent in August.
The rate appears to have hit a 40-year high of 8.1 percent in June.
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Economists had expected an even bigger drop, to about 6.7 percent, but food prices pushed up the headline figure.
Food purchased in stores increased at a rate of 11.4 percent. That’s the fastest rate of increase in grocery bills since August 1981.
Some of the price increases in the grocery aisle in the last year are surprising:
- Cereals have risen 17.9 percent.
- Baked goods rose 14.8 percent.
- Fresh fruit has risen 12.9%.
- Fresh vegetables have risen 11.8%.
- Dairy products rise 9.7 percent.
- Meat prices have risen 7.6 percent.
The number means that food inflation is nearly twice the rate of general inflation. Food inflation has now been higher than the headline rate for 10 months in a row.
Food prices may continue to rise
Worse still, there are reasons to fear that food prices will continue to rise for seasonal and monetary reasons.
“We have a weak Canadian dollar right now and we import a lot of what we consume,” Scotiabank economist Derek Holt said in an interview.
Dry conditions in food-producing areas of Europe and the United States will also drive up prices for Canadian buyers.
“I think we’re heading in the right direction, as supply chains adjust, but it’s still going to take some patience,” Holt said.
While the major supermarket chains have enough control over their supply chains to pressure suppliers to keep prices low, that’s not the case for independent grocers like Sue Ghebari, co-owner of MRT Family Foods in Calgary.
She says her costs on the wholesale side have gone up 25 to 30 percent, an increase she can’t pass on to customers because she would lose them.
“We’ve tried not to raise prices too much because raising prices doesn’t necessarily mean you’re going to sell the item,” he said. “If it’s too expensive, you’re not going to buy it.”
Shoppers blame the big supermarket chains
In Toronto, shopper John Romanelli says the cost of food is “appalling” right now and blames the big supermarket chains squarely.
“They have never made more money than they do today,” he told CBC News in an interview Tuesday. “We just got through two years of COVID and they’re making millions off of us… All they’re doing is pocketing everyone’s hardship.”
Gasoline prices, which contributed heavily to inflation earlier in the year, have now fallen for three months in a row. They are still, on average, 13 percent higher than a year ago, but fell more than seven percent during the month of September.
The one exception to the gas station price trend was BC, where unexpected oil refinery shutdowns caused gas prices to skyrocket across the province. Pump prices increased 27 percent during the month.
Gasoline prices have risen this month across the country, something that could lead to an unpleasant surprise in next month’s inflation data. “As those prices have since reversed, the next month could see headline inflation temporarily head in the wrong direction,” said CIBC economist Karyne Charbonneau.
Food and energy prices are always volatile, which is why the data agency removes them from some of its numbers to calculate and get a better picture of underlying price pressures in the broader economy.
The data agency tabulates three measures: the median CPI, the cut CPI, and the common CPI, which together are known as “core inflation.”
The base rate was unchanged at 5.3 percent for the month, a worrying sign that inflation is starting to take hold even as the Bank of Canada has been aggressively raising rates to rein it in.
Charbonneau says the biggest thing the central bank will take away from the latest inflation numbers is the need for higher rates to further cool demand.
“The Bank of Canada has clearly not yet slain the dragon of inflation and is therefore poised for another big rate hike next week.”