The country’s annual rate of inflation rose last month to its highest level since 2003, Statistics Canada said on Wednesday, amid ongoing supply chain disruptions in the wake of the COVID-19 pandemic.
The agency said its consumer price index was up 4.4 percent in September, compared to a year-on-year increase of 4.1 percent in August.
While gasoline was the biggest driver for rising prices, food prices were not sustained.
Mr Thanabalasingam, senior economist at TD Bank, told Granthshala News, “Food was a key component of the September rise in inflation, and several factors played a role in this.”
“You had temporary factory closures. You had the general theme of high input costs as well as supply chain disruptions. So all three factors contributed to the rise in food prices last month.
Overall, food costs rose 3.9 percent year-on-year compared to 2.7 percent in August. The biggest gain was in store-bought meals (4.2 percent), followed by restaurant meals (3.1 percent).
But are there high prices for living here? Economists say the answer to this question will depend on how long the disruption in the supply chain lasts.
“It is probably the million-dollar question of when these supply chain disruptions will start to fade away. From recent reports, it would suggest that maybe in the second half of 2022,” Thanabalasingam said. “So until then, you can still see price gains as a result of supply issues.”
RSM’s chief economist Joe Willis expects inflation to peak sometime before the end of the year and then drop “significantly” after next spring.
“Things will look much better on the inflation front as people get back to work as supply chains are restructured,” he told Granthshala News.
When it came to food in September, some of the biggest prices were seen in meat products, up 9.5 percent overall, followed by seafood (6.2 percent) and dairy products (5.1 percent).
The prices of edible fats and oils increased by 18.5 percent, the biggest annual increase since January 2009.
According to StatCan, bacon prices rose a whopping 20 percent since January 2015, partly driven by the temporary closure of production facilities.
Butter saw the highest increase in prices of all dairy products (6.3 percent), followed by cheese (4.6 percent), and eggs (5.4 percent).
One category that saw a decrease was fresh vegetables, where prices fell by 3.2 per cent year-on-year, mostly due to tomato prices, which had fallen 26 per cent last month.
This year, input costs for agricultural staples such as corn, wheat and soy have skyrocketed, pushing up the cost of all types of food, including meat and packaged goods.
“So it is expected that we will see some filtering into food prices,” RBC senior economist Nathan Janzen told Granthshala News.
But he said the food production industry is slightly less exposed to Granthshala supply chain disruptions than other regions because Canada is a Granthshala producer of food.
“Certainly something like dairy products, they’re tightly controlled and we don’t do a lot of trade with the rest of the world, but we’ve seen food prices go up, productivity costs go up. A lot has to be paid,” Janzen said.
Janet Music, who is the research program coordinator at Dalhousie University’s Agri-Food Analytics Lab, cited climate change as playing a role in rising food prices as well.
“Climate change has created very adverse weather effects, and so has been a difficult crop in the Northern Hemisphere,” she said. “Droughts in the West, wildfires in California, floods in Europe … It will, of course, affect the transportation of various goods as well.”
A recent report from Dalhousie’s Agri-Food Analytics Lab found that Canadians are changing their shopping behavior to save money as a result of rising food costs.
According to the report published on September 29, 86 percent of Canadians surveyed believe food prices are higher than they were six months ago. As a result, two out of five people said they had changed their behavior in the market in the past year. .
Bank of Canada Governor Tiff McCalem has said the central bank will act to contain inflation if the current round of price increases exceeds the one-off pressure point.
However, the central bank, which is set to issue its next interest decision next week, has maintained that high inflation is temporary.
“Something is transitory if behavior doesn’t change,” the Conference Board of Canada said in a report after the latest inflation reading on Wednesday.
“But we are seeing a change in behavior for businesses, for example, when it comes to setting higher prices for their goods and services. Price rise is a long-lasting phenomenon and should be treated as such.”
Brusuelas and Thanabalasingam and the Canadian Conference Board expect inflation to persist into the spring of 2022 due to supply chain issues.
And the general consensus remains that…