Canada’s inflation rate hit 5.7% year over year in February, up from 5.1% in January, as price increases continued to broaden across categories, according to data from Statistics Canada on Wednesday.
The eye-popping figures, however, do not capture price increases associated with Russia’s invasion of Ukraine. The conflict has caused prices at the pump to jump and will result in supply shocks in a plethora of commodities that both countries are key exporters of, from fuel to raw metals to agricultural products.
If anything, this is only a warmup to an expensive spring and summer.
The ripple effect of this price shock could push inflation over the 7% mark, which would be the highest since the early 1980s.
All measures of core inflation further deviated from the Bank of Canada’s 2% target, evidence of pervasive price increases. Excluding food and energy, inflation was at 3.9%, a notable departure from January’s figure of 3.5%.
Gasoline prices were up by 32.3% from a year earlier as uncertainty regarding supply because of geopolitical conditions abroad put upward pressure on prices.
Food prices were rising at a faster pace of 6.7% on an annual basis, partly because of high input prices and transportation costs.
Housing costs also rose by 6.6% as prices of homes and rentals continued to jump, while utilities hit a new high of 12.4% on a year-over-year basis because of rising natural gas prices.
The takeaway
Since so much of the inflation at this point is subject to global conditions, domestic policies can do little to control prices.
This will hit low-income households and small businesses the hardest as purchasing power slips away after decades of disinflation.
