Canada’s inflation rate jumped to 3.7 per cent in July, as the cost of shelter and durable goods went up at a fast enough pace to push the cost of living up to its highest level since 2011.
Statistics Canada reported Wednesday that the homeowners’ replacement cost index, which is related to the price of new homes, went up at an annual pace of 13.7 per cent in July. That’s the fastest uptick on record dating back to 1987.
The price of furniture increased at an annual pace of 13.4 per cent, in large part due to tariffs that the government implemented on upholstered items from China and Vietnam earlier this year.
The rising price of cars was also a major contributor to the upside, with passenger vehicle prices rising 5.5 per cent. “The gain was partially attributable to the global shortage of semiconductor chips,” the data agency said.
Food prices increased by 1.7 per cent, a much slower pace of gain than seen of late. Within the food category, the price of meat rose by 3.1 per cent while dairy went up by 3.5 per cent. On the opposite side of the ledger, prices for fresh vegetables and fruit actually declined in the past year, by 7.5 per cent and 0.6 per cent, respectively.
The inflation rate went up in every province in Canada, but there were wide regional differences. Saskatchewan had the lowest increase in the country, at 2.3 per cent, while Prince Edward Island saw its cost of living increase by 6.1 per cent. All four provinces east of Quebec had rates higher than the national average.
Statistics Canada says part of the inflation spike is due to comparing prices to the lows seen one year ago, and the Bank of Canada has warned that inflation is likely to hover around three per cent this year because prices are being compared to the drop in prices and spending during the early months of the pandemic.
The 3.7 per cent inflation rate is higher than the 3.1 per cent clocked in June, and also more than the 3.4 per cent that economists were expecting. It ties the previous high-water mark for inflation, which was hit in May 2011. Prior to that, you’d have to go all the way back to 2003 to find a time when Canada’s rate was higher.
“The pandemic’s effect on price growth is not only on the supply side, where production disruptions are adding to the cost of manufactured goods such as autos, but also on demand, where policy supports have driven robust spending on housing and durable goods items,” TD Bank economist James Marple said.
“We are also now starting to see the impact of faster price growth in re-opening services sectors such as restaurants.”