Canada’s inflation rate rose last month, at an annual rate of four per cent, mainly due to a rise in gasoline prices.
Statistics Canada reported Tuesday that the inflation rate rose 0.7 percentage points, largely because gasoline prices rose annually for the first time since January.
Pump prices rose 4.6 percent in August alone and 0.8 percent higher than a year ago.
Energy prices tend to have a huge impact on the overall inflation rate, because they filter into everything else, from production costs to the transportation of goods.
Karleen Jack is feeling the impact of rising gas prices on two fronts: as a small business owner and as a consumer. She runs Lawn Warriors Property Maintenance, a company that offers outdoor maintenance, such as lawn care and leaf and snow removal, in Ajax, Ontario, just east of Toronto.
She normally serves customers from across the region, but the high price of gas right now has forced her to limit the distance she is willing to travel.
“We had to be creative,” he told Breaking: in an interview. “In view of last year’s increases, we had to reduce the area to a smaller territory.”
From gas in your truck to premium fuel for your hedges, leaf blowers, trimmers and lawn mowers, you feel every pump go straight up. She estimates that her costs increased about 15 percent last year, but she has not been able to pass those increases on to her clients. That’s why she is reducing the number of jobs she takes and the amount of income her family business derives from each of them.
“You can do that, but within reason and only for a time,” he said.
Vijay Muralidharan, energy analyst and managing director at R Cube Consulting Inc., says people like Karleen and others should prepare for prices to remain high as oil prices once again flirt with $100 a barrel and Winter in North America is coming. It is likely to cause a targeted increase in diesel prices.
“Don’t be surprised if this high inflation continues and remains at higher levels in the coming months,” he told Breaking: in an interview. “The only thing that can drive this is falling demand and that can only happen through a recession, a deep recession that kills demand.”
Fuel is not the only thing that is becoming more expensive either. Prices of other necessities, such as food and housing, continued to rise.
The cost of keeping a roof over your head rose six per cent in the year to August, up from 5.1 per cent in July. Within that, rent was a major factor, with average rents increasing 6.5 percent nationwide.
It also didn’t get cheaper to own.
Mortgage interest costs rose a further 2.7 per cent during the month and are now up 30.9 per cent in the year to August. This represents an increase from July’s already impressive level of 30.6 percent.
The CEOs of Canada’s five largest grocery chains have agreed to work with the government to stabilize prices and come up with a plan to address the problem within three weeks. The government said that if CEOs failed to meet that deadline, they could face punitive taxes.
However, there was a comparable source of relief from an unexpected place: the supermarket aisle.
The price of food purchased in stores rose 6.9 percent last year. While it is still almost double the headline inflation rate, it is below recent highs of more than 11 percent.
It is also the slowest annual increase in the typical grocery bill since January 2022.
While this may be good news for most Canadians, anyone expecting a complete decrease in their grocery bill will likely be disappointed. Economist Robert Kavcic of the Bank of Montreal says “there is a big difference between a slowdown in inflation, which is good news, and an outright drop in prices.”
“If you go from eight percent inflation to, say, one or two percent, that doesn’t mean that the price of the grocery bag is going down,” he said in an interview. “We’re going to get some relief in terms of the inflation rate, but not necessarily what it costs to go out and buy food and feed your family.”
The unexpectedly high inflation number raised the odds of another rate hike by the Bank of Canada to a 50/50 chance, but Kavcic says a lot can happen between now and the Bank of Canada’s next rate decision on the 25th. October, including another inflation figure, corresponding to September.
“In a month or two, if we keep looking at inflation numbers like these, I think the Bank of Canada might actually have to go out and take another crack at this,” Kavcic said, adding that he still thinks the bank is likely to keep still for a while.
“The rates are probably high enough to get the job done. They just haven’t been high enough for long enough.”
