In the summer of 2022, Canadians found their household budgets stretched further than at any point in four decades. Figures released from Ottawa on July 20 showed prices running 8.1 per cent above their level a year earlier, the steepest annual climb since January 1983. Behind the number stands a familiar story of fuel costs swelling and an economy shaking off its pandemic restrictions, while the central bank had only just answered with a full point rise in its key rate, now at 2.5 per cent, as it weighed whether ordinary people had begun to expect that prices would keep rising.
Canada's Inflation Climbs to 8.1% in June, Highest Since January 1983
Gas prices were up more than 50 per cent from a year earlier
Mark
Eight point one per cent sounds big, but why does January 1983 matter as a comparison?
Mimi
Because it tells you how long it's been. Nothing in the yearly figures has been this high in roughly four decades, so a lot of people have never shopped through anything like it.
Mark
And gas is the main reason?
Mimi
Largely, yes. Statistics Canada said gas prices rising even faster pushed June above May's 7.7 per cent. Year over year, gas was up more than 50 per cent.
Luke
Careful there. "Largely" is the agency's word, and the reporting gives no breakdown of how many points gas contributed. We know it's the main driver, not by how much.
Mark
Fair. Did economists see it coming?
Mimi
The report says the June number matched expectations, with energy and food still rising as the economy reopened further.
Luke
Worth noting that it says energy and food kept rising, but gives no food figure. That part is unquantified here.
Mark
How does the Bank of Canada fit in?
Mimi
It had just raised its key rate a full percentage point to 2.5 per cent, citing fears about inflation expectations among consumers and businesses.
Luke
And what it does next isn't in this story. Anyone saying the bank will hike again is going beyond what's reported.
Il Polso
- Inflation climbed from 7.7 to 8.1 per cent in a single month, a rise that sent alarm through household budgets across the country.
- Gasoline prices, up more than 50 per cent from a year earlier, pushed most of the acceleration and dragged everyday costs upward with them.
- Energy and food prices kept climbing as the economy reopened, leaving little relief in sight for families already feeling the squeeze.
- The Bank of Canada moved decisively with a full point rate hike to 2.5 per cent, racing to prevent rising expectations from locking the inflation in place.
In the summer of 2022, Canadians found their household budgets stretched further than at any point in four decades. Figures released from Ottawa on July 20 showed prices running 8.1 per cent above their level a year earlier, the steepest annual climb since January 1983. Behind the number stands a familiar story of fuel costs swelling and an economy shaking off its pandemic restrictions, while the central bank had only just answered with a full point rise in its key rate, now at 2.5 per cent, as it weighed whether ordinary people had begun to expect that prices would keep rising.
Prices in Canada were 8.1 per cent higher in June than a year before, according to figures released from Ottawa on July 20, 2022. It is the biggest annual jump the country has seen since January 1983, and it marks a sharp step up from the 7.7 per cent recorded in May.
Statistics Canada pointed mainly to gasoline, which grew more expensive at an even faster pace. Compared with a year earlier, gas prices were up by more than 50 per cent, and that single category accounts for most of the acceleration. Economists were not surprised. Energy and food prices kept climbing as the economy continued to reopen, and the pressures that had been building through the spring had not eased by early summer.
The numbers arrived just after the Bank of Canada raised its key interest rate by a full percentage point, to 2.5 per cent. The size of that move reflected worry about inflation expectations, the fear that households and businesses will come to assume high price growth is here to stay and act on that assumption.
The source material does not say what the bank will do next. What to watch now is whether gas prices keep climbing or begin to settle, and how the central bank responds at its next decision.
Prices in Canada were 8.1 per cent higher in June than they were a year earlier, according to figures released from Ottawa on July 20, 2022. It is the biggest year-over-year jump the country has recorded since January 1983.
The June reading follows a May figure of 7.7 per cent, so the pace of price increases did not just stay high; it picked up. Statistics Canada, the agency that publishes the numbers, pointed mainly to one cause: gasoline, which grew more expensive at an even faster clip than before.
Compared with June of the previous year, gas prices were up by more than 50 per cent. That single category accounts for most of the acceleration between May and June, according to the agency's explanation of the data.
The result did not catch economists off guard. The acceleration matched what forecasters had expected, as energy and food prices kept climbing and the economy continued to reopen further. In other words, the pressures that had been building through the spring had not eased by early summer.
The figures landed just after the Bank of Canada made a notable move on interest rates. At its most recent rate decision, the central bank raised its key interest rate by a full percentage point, taking it to 2.5 per cent. The size of the hike reflected growing concern about inflation expectations, meaning the worry that consumers and businesses will start to assume high price growth is here to stay and behave accordingly.
That is the thread connecting the June number to the policy decision. A rate of 8.1 per cent is the headline, but the central bank's attention is on whether households and companies come to expect it. The source material does not say what the bank will do next, and it offers no forecast for July.
What to watch now is whether gas prices, the main driver in June, continue to climb or begin to settle, and how the Bank of Canada responds in its next decision with its key rate at 2.5 per cent.
Citazioni salienti
Price acceleration in June was largely the result of gas prices rising even faster.— Statistics Canada (paraphrased)
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Economy & Finance