Inflation rate in Canada slows to 6.3%, but groceries are still doubling that pace

Inflation rate in Canada slows to 6.3%, but groceries are still doubling that pace

The annual inflation rate in Canada dropped to 6.3 per cent in December, its lowest level since February 2022.

Canada grocery store price tag

While still more than twice what the Bank of Canada targets, the official inflation rate is now at its lowest point in almost a year, at 6.3 per cent. (Emile Wamsteker/Bloomberg)

Statistics Canada reported Tuesday the deceleration was mostly due to a 13 per cent decrease in gasoline, which saw its largest one-month decline since April of 2020.

The average gasoline price in Canada is now three per cent higher than it was this time last year, before the Russian invasion of Ukraine affected the oil market.

Grocery prices moved up 0.3 per cent during December, and have hiked 11 per cent year over year. That’s a slight decrease from the 11.4 per cent pace in November, but groceries are still getting more expensive.

Increased grocery costs in Canada

In Toronto, Kara Manovich says she’s seen the price of everything is hiking lately.

“I’m just taking the approach that there’s not much I can do … we’ve all got to eat,” she told CBC News in an interview. “I can’t starve, sadly, so I’ve just got to roll with the punches, I guess.”

In Burlington, Ont., Rick Squires sees high food prices coming in and out of his business, every day. He’s the manager or Roseland Produce, a food importer that ships fresh produce in southern Ontario.

Some things are worse than others, however. Before, he could get romaine lettuce from California or strawberries from Arizona for around $35. Today that same case would cost him $50. Before the pandemic, both of those items would likely cost him less than half what they do today.

Leslie Echino, owner of Annabelle's kitchen in Calgary, says higher costs for food have made her razor thin profit margin even smaller than it normally is. (Anis Heydari/CBC)

Leslie Echino, owner of Annabelle’s kitchen in Calgary, says higher costs for food have made her razor thin profit margin even smaller than it normally is. (Anis Heydari/CBC)

Inflation rate downturn ‘encouraging,’ says BMO exec

The inflation rate in Canada slowing down to 6.3% in December helps the Bank of Canada find paths to its target of 2-3%, says Earl Davis of BMO Global Asset Management.

Calgary restaurant owner Leslie Echino is concerned. She says costs for ingredients like flour and oil have increased this year.

“Canola oil is about $4 a litre — that’s three times the price of gasoline,” she said in an interview with CBC News on Monday.

She can’t pass on those added costs, dollar for dollar, because she’ll lose business, so her thin profit margin just shrinks.

“It is a challenge when your food costs go from 19 or 20 per cent to 30 per cent. That’s a lot of money,” she said.

“We’re doing the best we can and trying not to pass that on too much.”

Other costs easing

Overall, the cost of living actually declined by 0.6 per cent on a monthly basis from November to December. That’s the biggest monthly drop since 2020, and enough to bring Canada’s official inflation rate down to its lowest point in almost a year.

It’s still more than twice the upper range that the Bank of Canada likes to see, however, which is why economists expect the central bank is likely to raise its benchmark interest rate at least one more time, when it meets to set monetary policy next week.

“While core inflation remains too high … things look better,” CIBC economist Karyne Charbonneau said of the numbers. “Overall, this report is largely as anticipated and we therefore continue to expect the Bank of Canada to raise rates by 25 [points] next week before pausing for the rest of the year.”

Inflation rates in the U.S. and Canada

Inflation rates in the U.S. and Canada

Source: CBC News – Pete Evans

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