Inflation in Canada breaks all records in almost 40 years

Also, the wallet of the Canadians is very touched. This week, Statistics Canada – the federal agency in charge of collecting official data – published that the year-on-year rate of inflation in May reached its highest level in almost 40 years: it reached 7.7%. Prices had not seen such a high increase since January 1983. Belt-tightening is no longer a sacrifice for a few among the population of this G-7 member country. If the province of Saskatchewan is the one that appears with the lowest indicator (7%), Prince Edward Island is the most affected (11.1%).

The scenario continues to worsen: Canadian inflation in May was 0.9% higher than in April. The federal agency underlines the impact of “supply chain disruptions and rising transportation costs.” In recent weeks, analysts have alluded, among other things, to the war in Ukraine, outbreaks of avian flu, covid-19, and extreme weather events to explain the complex economic situation. However, the increase in gasoline has been the dominant factor. Its price at service stations has increased by 48% in one year. The difference in inflation between April and May, according to Statistics Canada, was mainly due “to the rise in gasoline prices, which increased by 12.0%”.

In one year, car prices have increased by 6.8%; furniture and rent by 7.4% and 15.8% respectively. However, the bill in supermarkets is extremely worrying, especially regarding the purchase of many foods. Fresh vegetables are sold at 10.2% more expensive than 12 months ago, fish at 11.7%, and edible oils at 30%. A survey by the firm Mainstreet Research -published earlier this month- showed that almost one in four Canadians declared eating less than they should due to economic hardship. Another survey released days later – by Statistics Canada – indicated that one in five expects to use food banks or community kitchens in the next six months. Leslie Preston, the chief economist at TD Bank, wrote in a report: “If you’re under 40, you’ve never experienced inflation like this, and unfortunately, we don’t expect much respite in the future.”

Chrystia Freeland, federal finance minister, acknowledged on June 16 – at a business forum in Toronto – that “many Canadians are finding it increasingly difficult to pay their bills at the end of the month”, although she insisted that it is a phenomenon that hits to different countries due to a “difficult global environment”. The minister emphasized different measures that her Government is applying. The plan, which is around 8.9 billion Canadian dollars (about 6.85 billion US dollars), includes points such as rent support, checks for low-income families, and childcare subsidies.

The Conservative Party asks that the Government of Justin Trudeau freeze carbon emission rates and fertilizer tariffs for a few months, along with a temporary suspension of the fuel tax, a measure that US President Joe Biden asked the Congress of his country this Wednesday. Jagmeet Singh, leader of the New Democratic Party (a group with which Trudeau’s liberals maintain a political alliance) suggests raising taxes for large companies and direct aid to families with children. “Our proposal will not increase inflation. It is about redistributing the unexpected profits of the system,” he said Wednesday in Ottawa.

The Central Bank of Canada is scheduled to announce the new interest rates in mid-July. The institution had lowered the loan rate to 0.25% at the beginning of 2020 to give the economy a boost in the hard times of the pandemic. However, it has increased three times so far in 2022 due to inflation, currently standing at 1.5%. Various experts calculate that it could reach 2.25%.