Inflation rate slows to 6.3% — but groceries are still going up at nearly twice that pace

While still more than twice what the Bank of Canada targets, the official inflation rate is now at its lowest point in almost a year, at 6.3 per cent. (Emile Wamsteker/Bloomberg - image credit)
While still more than twice what the Bank of Canada targets, the official inflation rate is now at its lowest point in almost a year, at 6.3 per cent. (Emile Wamsteker/Bloomberg - image credit)

Canada's annual inflation rate cooled to 6.3 per cent in December, its lowest level since February.

Statistics Canada reported Tuesday that the deceleration in the cost of living was mostly due to a 13 per cent decrease in the price of gasoline, which saw its biggest one-month plunge since April of 2020.

The average gasoline price across Canada is now only three per cent higher than it was this time last year, before the Russian invasion of Ukraine turned the global oil market upside down.

Canadians may have gotten some relief from higher prices every time they filled up their car last month, but the same can't be said of the price to fill up a shopping cart with food.

Grocery prices inched up another 0.3 per cent during the month of December, and have increased by 11 per cent year over year. That's a slight slowdown from the 11.4 per cent pace the previous month, but plenty of food items are still getting more expensive, particularly fresh vegetables, which have gone up in price by 13.6 per cent in the past year.

Higher food costs

In Toronto, shopper Kara Manovich says she's noticed the price of just about everything is skyrocketing lately.

"I'm just taking the approach that there's not much I can do ... we've all got to eat," she told CBC News in an interview. "I can't starve, sadly, so I've just got to roll with the punches, I guess."

About an hour's drive away, in Burlington, Ont., Rick Squires has a front-row seat to high food prices coming in and out of his business, every day. He's the general manager or Roseland Produce, a food importer that ships fresh produce all over southern Ontario.

Anis Heydari/CBC
Anis Heydari/CBC

From labour costs to high prices for transportation, he says on average his costs are up across the board by about 30 to 40 per cent from where they were before the pandemic.

Some things are worse than others, however. A year ago, he could get a case of romaine lettuce from California or strawberries from Arizona for about $35. Today that same case would cost him $50. Before the pandemic, both of those items would likely cost him less than half what they do today.

While some consumers are waiting and hoping for prices to come down again, Squires worries that the current elevated level for produce may be the new baseline.

"That $25 for a case of strawberries, I don't think we're ever going to see that again," he said. "We could be into the new normal for the price of produce."

WATCH | Economist discusses inflation outlook:

Calgary restaurant owner Leslie Echino is similarly concerned. The owner of Annabelle's Kitchen says costs for ingredients like flour and oil have skyrocketed this year.

"Canola oil is about $4 a litre — that's three times the price of gasoline," she said in an interview with CBC News on Monday.

She knows she can't pass on all those added costs, dollar for dollar, because she'll lose customers, so her already thin profit margin just shrinks.

"It is a challenge when your food costs go from 19 or 20 per cent to 30 per cent. That's a lot of money," she said.

"We're doing the best we can and trying not to pass that on too much."

Other costs easing

Overall, the cost of living actually declined by 0.6 per cent on a monthly basis from November to December. That's the biggest monthly drop since 2020, and enough to bring Canada's official inflation rate down to its lowest point in almost a year.

Inflation rates in the U.S. and Canada

It's still more than twice the upper range that the Bank of Canada likes to see, however, which is why economists expect the central bank is likely to raise its benchmark interest rate at least one more time, when it meets to set monetary policy next week.

"While core inflation remains too high ... things look better," CIBC economist Karyne Charbonneau said of the numbers. "Overall, this report is largely as anticipated and we therefore continue to expect the Bank of Canada to raise rates by 25 [points] next week before pausing for the rest of the year."

WATCH | Is Inflation changing the way you shop?