Loonie loses buying power as Canadians see inflation jump
Rising food prices, rebounding transportation costs lead 1.6-per-cent increase in consumer price index
Galloping food costs drove inflation 1.6 per cent higher in December, the steepest rise in a year, while prices for transportation, including gasoline, registered their first annual increase in nearly 14 months, Statistics Canada said Friday.
Economists attribute the stepped-up inflation rate — compared with a1.4-per-cent rise in November — to factors that include the low loonie, drought in growing regions such as California, along with seasonal weather conditions.
The consumer price index (CPI) increase in Canada contrasts with a 0.1-per-cent drop in seasonally adjusted inflation in the U.S. last month due to lower energy costs and falling food prices.
In Canada, however, “it’s mainly a dollar story,” said BMO economist Doug Porter, who noted that the exchange difference between Canadian and U.S. dollars fed the 13.3-per-cent jump in the cost of fresh vegetables from a year ago.
In data accompanying its CPI report, StatsCan said lettuce prices are up 21.8 per cent compared to December 2014, while fresh and frozen beef was also more expensive, rising 5.8 per cent year over year. Prices for vegetables and fresh fruit rose more on a year-over-year basis in December than in the previous month, while the meat component of the price index increased less than in November as climate conditions eased in the U.S. southwest and herd sizes rebounded.
Prices for food purchased from restaurants rose 2.8 per cent year over year in December, matching the increase in November, StatsCan said.
It said transportation prices rose 0.6 per cent after declining annually for 13 consecutive months mainly due to a smaller year-over-year decrease in gas prices in December compared to November. As well, the purchase of passenger vehicles rose 3.1 per cent following a 1.9 per cent increase the previous month.
Gasoline prices have declined in Canada but “have not fallen as much as the reduction in crude oil prices would suggest based on historical experience,” the Bank of Canada said in its quarterly monetary policy report this week.
Had pump prices more closely tracked oil, the inflation rate would have been 0.6 percentage points lower in November, the central bank said. GasBuddy analyst Dan McTeague has cited oil company profit-taking and says refinery margins have increased compared to those in the U.S.
As food prices exerted upward pressure, clothing costs declined and were barely up from a year ago, held back by the mild December weather and intense retail competition.
Statistics Canada said the clothing and footwear index was up 0.7 per cent year-over-year in December after rising 2.1 per cent in November. Men’s clothing registered a smaller year-over-year increase than in November, while prices for women’s clothing declined in the 12 months to December after increasing in the previous month.
Consumer prices rose in all provinces, with British Columbia posting the largest gain. In the Prairies, consumer prices were up less year-overyear than in November.
In Ontario, the CPI rose 1.7 per cent last month, the largest gain since De- cember 2014. Electricity prices increased 8.9 per cent compared with the same month a year earlier, partly as a result of new winter electricity prices introduced in November.
The CPI in Alberta was up 1.5 per cent in the 12 months to December after increasing 2 per cent in November, mainly due to natural-gas price drops.