Expert warns of food consumption habits amid rising prices
A new survey by Dalhousie University's Agri-Food Analytics Lab asked Canadians about their food consumption habits amid rising prices.
Canada's latest reading on inflation came in hotter than expected as the cost of groceries continued to climb at the fastest pace in decades, setting the stage for another sizeable interest rate hike next week.
In its latest consumer price index report, Statistics Canada said the country's annual inflation rate in September dropped slightly to 6.9 per cent from 7.0 per cent in August.
BMO's chief economist Douglas Porter said the deceleration in headline inflation was smaller than what was expected.
"Bluntly, inflation did not ease as much as anticipated last month, even as gasoline costs took a big step back," he said.
With underlying inflation pressures still sticky and the Bank of Canada signaling it isn't backing away from rate hikes yet, BMO is forecasting the central bank will raise its key interest rate by three-quarters of a percentage point next Wednesday.
Statistics Canada attributed the slower pace of price growth to lower gas prices. Prices at the pump fell by 7.4 per cent in September from August.
As gas prices fell, though, grocery prices rose at the fastest rate since August 1981, with prices up 11.4 per cent compared with a year ago. That's up from the previous month's annual rate of 10.8 per cent and the 10th straight month that food prices have outstripped the overall inflation rate.
The slight decline in the headline inflation rate is similar to what the U.S. experienced in September, with their headline inflation rate falling from 8.3 to 8.2 per cent.
Despite seeing only a modest decline in the annual inflation rate, recent monthly trends show inflation is headed in the right direction, said University of Calgary economics professor Trevor Tombe.
"The headline rate that we're seeing right now largely reflects price increases that are no longer occurring," Tombe said, noting that the majority of the price acceleration happened between January and May.
With gas prices falling in recent months, Tombe said what was the main driver of high inflation is now unwinding.
Tombe added that the recent weakening of the Canadian dollar could continue to drive up grocery prices as Canada purchases some of its food from abroad.
The federal agency said the rapidly rising grocery prices are due to weather conditions, higher prices for fertilizer and natural gas and the Russian invasion of Ukraine.
With September marking the start of the academic year for many students, Statistics Canada noted tuition fees were up 2.3 per cent compared with a year ago.
Excluding food and energy, prices rose by 5.4 per cent year-over-year, a slight acceleration compared with August.
On a monthly basis, the consumer price index rose by 0.1 per cent.
Rising prices over the last year have eroded many Canadians' purchasing power as wages have lagged inflation.
Average hourly wages were up 5.2 per cent in September compared with a year ago, falling short of the rate of inflation.
The Bank of Canada will be monitoring the latest data on CPI ahead of its upcoming interest rate announcement, paying close attention to its preferred core measures of inflation.
These measures, which tend to provide less volatile readings, were unchanged from August.
The Bank of Canada is expected to deliver another interest rate increase next Wednesday, with forecasters split between a half and three-quarters of a percentage point hike.
The central bank, which has a mandate to maintain low and stable inflation, has been combating high inflation by raising interest rates. Since March, it has raised its key interest rate five times this year, bringing it from 0.25 to 3.25 per cent.
The interest rate hikes are feeding into higher borrowing costs for Canadians and businesses, with the Bank of Canada aiming to slow spending in the economy enough to bring inflation back to its two per cent target.
Reaching that goal will take time, however, as the full effect of these rate hikes won't be felt until one to two years from now.
Still, the effect of higher interest rates is beginning to be felt in the housing market, which has been cooling after home prices reached a peak in February.
For homeowners or prospective buyers, higher interest rates are pushing up the cost of mortgage interest, while other costs rise at a slower pace.
This report by The Canadian Press was first published Oct. 19, 2022.
A new survey by Dalhousie University's Agri-Food Analytics Lab asked Canadians about their food consumption habits amid rising prices.
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