Inflation in Canada Dropped Slightly in November but Food Prices Are Rising Faster

People shop at a grocery store in Montreal on Nov. 16, 2022. Graham Hughes/The Canadian Press

Inflation has gone down 0.1 percent in November, reported Statistics Canada on Dec. 21, with the Consumer Price Index (CPI) rising 6.8 percent year-over-year compared to 6.9 percent in October.

While the general CPI dropped slightly, food prices marked an increase, rising 11.4 percent year-over-year compared to 11 percent in October.

“Food inflation remained broad-based, with prices for groceries rising at a faster rate than the all-items CPI every month since December 2021,” the agency wrote in its bulletin.

The price for edible fats and oils is up 26 percent year-over-year, non-alcoholic beverages 19.4 percent, eggs 16. 8 percent, and fresh fruit 11 percent.

Canadians had a bit of respite at the pump, with gas prices falling 3.6 percent in November following a 9.2 increase in October.

Statistics Canada says this was largely driven by price declines in Western Canada, along with the reopening of refineries in the west of the United States which led to lower prices in British Columbia and the Prairie provinces.

Year-over-year gas prices were still up 13.7 percent compared to 17.8 percent in October.

Statistics Canada also notes that shelter prices are rising despite a slower real estate market, mostly due to rising mortgage rates and rent costs.

Mortgage interest cost was up 14.5 percent in November compared to 11.4 percent in October, whereas the rent index rose 5.9 percent year-over-year compared to 4.7 percent in October.

The agency says that Prince Edward Island is seeing the biggest rise in rent prices with a 12.6 percent year-over-year increase, compared to British Columbia in second place at 7.2 percent.

Rising Interest Rates

The Bank of Canada (BoC) has put the pedal to the metal to slow down inflation in recent months, raising its policy rate from 0.25 percent in March to 4.25 currently.

The CPI peaked in June at 8.1 percent and has been around 6.8/6.9 since September.

The BoC has signalled at its latest rate hike announcement on Dec. 7 that there was more uncertainty about the need for future hikes.

BoC Governor Tiff Macklem said in his year-end address on Dec. 13 that future decisions would be based on incoming data.

The next rate announcements are scheduled for Jan. 25, March 8, and April 12.

Macklem acknowledged in a recent interview with the Globe and Mail that he had poorly predicted the current bout of inflation, expecting it would be close to 2 percent by the end of 2022.

“That’s a very big forecast error,” he said.

“If we’d known that there wasn’t going to be another [COVID] wave, and that the economy would reopen rapidly, and that households would come very rapidly back into the market and try to catch up and buy so many of the services that they hadn’t been able to enjoy for the last couple of years—yes, I think if we could have foreseen that, we would have started to raise interest rates earlier.”

Macklem also said in his year-end address that demand is now slowing and he expects GDP growth will be close to zero until mid-2023.

Prime Minister Justin Trudeau addressed this coming downturn in the economy in an interview with Quebec TV station TVA Nouvelles on Dec. 20.

He said the global economy is not going well and that it would be getting worse in the coming months.