Most of Canada to receive emergency alert test today
The federal government will test its capacity to issue emergency alerts today, with the exception of Ontario, where the test will take place on May 15.
Prices across the country rose at their fastest annual rate in a decade last month, with the promise of similar numbers through to the fall as the national economic reopening from pandemic measures allows consumers to spend more freely.
Statistics Canada said the 3.6-per-cent increase in the consumer price index in May was the largest yearly increase since May 2011 and outpaced the 3.4 per cent reading in April, which at the time was the fastest annual rate in nearly a decade.
Part of the rise in inflation is due to comparing prices to the low levels seen last year at the start of the pandemic for such items as gasoline, furniture and beef products.
However, Statistics Canada said the increase in year-over-year price growth in May wasn't solely because of this comparison. It noted more recent price pressures are also driving inflation, with rising housing costs among the leading reasons.
Adding to that are supply-chain issues that have made it more expensive to build new homes or cars, with costs being passed along to consumers.
The pickup in prices has come even as public health restrictions held back activity in high-contact sectors, said TD senior economist James Marple, noting the acceleration in inflation has come faster than forecasters and the Bank of Canada expected.
Prices are expected to rise over the summer as provinces ease public health restrictions, businesses look to make up for lost revenues and consumers have more places to spend their cash.
"Retailers have had a very tough time, bars and restaurants have had a very tough time over the past year and they're going to want to make up for some of that lost ground with higher prices," CIBC senior economist Royce Mendes said.
"They're going to want to pass on those costs and the key to remember here is that consumers can actually absorb those costs, maybe like never before because of all the savings that is built up during the pandemic."
The Bank of Canada expects inflation to hover around three per cent over the summer before easing later this year, then returning toward the bank's two per cent target, once prices stop being compared with the lows seen in March and April of last year, and as supply-chain issues work themselves out.
Separately Wednesday, the U.S. Federal Reserve raised its forecast for inflation south of the border to 3.4 per cent by the end of this year, from 2.4 per cent in its previous projection in March. The American central bank also expected to raise its benchmark short-term rate twice by late 2023, after previously estimating no rate hike before 2024.
The longer inflation stays high, the more people will come to expect it, and create a feedback loop of higher wage demands followed by offsetting price increases, said Thorsten Koeppl, an economics professor at Queen's University in Kingston, Ont.
Inflation takes off in this scenario and isn't consistent with the central bank's target, he said, meaning one thing: "You have to raise rates."
"For me, monetary policy is always controlling inflation expectations at the end of the day."
Excluding gasoline, which was up 43.4 per cent compared with the same month one year ago, the consumer price index would have been up 2.5 per cent.
Statistics Canada said the average of the three measures for core inflation, which are considered better gauges of underlying price pressures and closely tracked by the Bank of Canada, was 2.3 per cent in May, up from 2.1 per cent in April. The reading in May was the highest seen since April 2009.
BMO director of Canadian rates Benjamin Reitzes said in a note that while it's still too early to say whether firmer inflation is here to stay, the persistent strength in the figures may make the central bank a bit less comfortable with its accommodative monetary policy.
The Bank of Canada intends to keep its key policy rate at 0.25 per cent until the economy has recovered and inflation is sustainably back on target, which is expected to happen in the second half of 2022.
During a Senate committee appearance later Wednesday, governor Tiff Macklem warned the timing is "unusually uncertain given the difficulties in assessing the economy's supply capacity."
The Statistics Canada report said homeowner replacement costs, which includes prices for new housing, rose 11.3 per cent year-over-year in May, the largest increase since 1987. With the jump in May, Statistics Canada said that now makes 16 consecutive months of price increases driven by buyers looking for larger homes and higher construction costs.
Durable goods like vehicles were up 4.4 per cent in May from their levels in May 2020, which the statistics agency noted came against the backdrop of low interest rates and rising consumer confidence.
- With files from The Associated Press
This report by The Canadian Press was first published June 16, 2021.
The federal government will test its capacity to issue emergency alerts today, with the exception of Ontario, where the test will take place on May 15.
Prince Harry, the Duke of Sussex, has made headlines with his recent arrival in the U.K., this time to celebrate all things Invictus. But upon the prince landing in the U.K., we have already had confirmation that King Charles III won't have time to see his youngest son during his brief visit.
An Ontario man found out that a line of credit he thought was insured actually isn't after his wife of 50 years died.
After more than a century, Boy Scouts of America is rebranding as Scouting America, another major shakeup for an organization that once proudly resisted change.
With Donald Trump sitting just feet away, Stormy Daniels testified Tuesday at the former president's hush money trial about a sexual encounter the porn actor says they had in 2006 that resulted in her being paid to keep silent during the presidential race 10 years later.
In March, Indonesian officials and local fishermen rescued 75 people from the overturned hull of a boat off the coast of Indonesia. Until now, little was known about why the boat capsized.
An Ontario woman said it would have been impossible to buy a house without her mother – an anecdote that animates the fact that over 17 per cent of Canadian homeowners born in the ‘90s own their property with their parents, according to a new report.
Canadian immigrants threatened by hostile regimes are urging parliamentarians to quickly pass the 'Countering Foreign Interference Act' so they can feel safe living in their adopted home.
A long-simmering feud between hip-hop superstars Drake and Kendrick Lamar reached a boiling point in recent days as the pair traded increasingly personal insults on a succession of diss tracks. Here’s a quick overview of what’s behind the ongoing beef.
An Ontario man says he paid more than $7,700 for a luxury villa he found on a popular travel website -- but the listing was fake.
Whether passionate about Poirot or hungry for Holmes, Winnipeg mystery obsessives have had a local haunt for over 30 years in which to search out their latest page-turners.
Eighty-two-year-old Susan Neufeldt and 90-year-old Ulrich Richter are no spring chickens, but their love blossomed over the weekend with their wedding at Pine View Manor just outside of Rosthern.
Alberta Ballet's double-bill production of 'Der Wolf' and 'The Rite of Spring' marks not only its final show of the season, but the last production for twin sisters Alexandra and Jennifer Gibson.
A mother goose and her goslings caused a bit of a traffic jam on a busy stretch of the Trans-Canada Highway near Vancouver Saturday.
A British Columbia mayor has been censured by city council – stripping him of his travel and lobbying budgets and removing him from city committees – for allegedly distributing a book that questions the history of Indigenous residential schools in Canada.
Three men in Quebec from the same family have fathered more than 600 children.
A group of SaskPower workers recently received special recognition at the legislature – for their efforts in repairing one of Saskatchewan's largest power plants after it was knocked offline for months following a serious flood last summer.
A police officer on Montreal's South Shore anonymously donated a kidney that wound up drastically changing the life of a schoolteacher living on dialysis.