Customers shop for produce at Freestone Produce market in Calgary on July 18. Despite the annual inflation rate easing to its lowest levels since early 2021, the price of groceries rose 9.1 per cent on an annual basis in June.Gavin John/The Globe and Mail
Canada’s annual inflation rate ticked up in July, moving back above the Bank of Canada’s target range. The Consumer Price Index rose 3.3 per cent in July from a year earlier, up from 2.8 per cent in June, Statistics Canada said Tuesday.
The July inflation report recorded a slowdown in grocery inflation, but Canadians continue to see sharp increases at the supermarket. What’s driving the higher costs, and how will it affect your grocery bill? Here’s what you need to know.
What’s the current outlook on grocery prices in Canada?
Grocery prices remain elevated, but the July numbers show that food inflation, in particular, is slowing somewhat. Prices were up 8.5 per cent in July from a year ago, but down from an annual 9.1-per-cent increase in June.
Food inflation is being dragged lower by fresh fruit prices, which fell 6.5 per cent month-over-month, the largest drop since February, 2008. The price of grapes fell 40.9 per cent compared with June, while the price of oranges dropped 1.8 per cent.
Bakery products, however, cost 9.8 per cent more in July over the previous year, while meat was up 7.7 per cent.
Even the small grocery inflation reprieve in July may not last long. Russia’s recent withdrawal from a key grain export deal with Ukraine could once again disrupt global food supplies and lead to higher prices. Looking at the big picture, the cost of a typical basket of groceries “has risen nearly 20 per cent over the past two years,” according to TD economist Leslie Preston – the biggest jump in more than 40 years.
Why are grocery prices so high?
Last month, Russia pulled out of the deal that the U.N. and Turkey brokered to provide protection for ships carrying Ukrainian grain through the Black Sea.Efrem Lukatsky/The Associated Press
Over 2021 and 2022, a confluence of factors – including supply chain disruptions, labour shortages, robust demand and extraordinary pandemic-related fiscal stimulus – led to a global run-up in consumer prices, the likes of which hadn’t been seen in decades.
This only worsened with Russia’s invasion of Ukraine. Russia and Ukraine are the first and fifth largest global exporters of wheat. Russia is also a top producer of nitrogen, phosphorus, and potassium, the key components of fertilizer, and a major global supplier of cod and haddock. Since the conflict began, there has been an upward pressure on global food prices and energy prices worldwide - something that could potentially continue after Russia’s recent decision to halt participation in Ukraine’s grain deal.
Another reason for higher food prices is climate change and an increase in extreme weather events. Heatwaves, wildfires and drought, which have become increasingly frequent and severe over the past few years, have impacted the supply and production of food products. For example, the Prairies experienced a severe heatwave and drought in 2021 which contributed to higher prices for meat, particularly beef, and grain products. Meanwhile, parts of southwestern United States also experienced a megadrought late last year, affecting the fresh fruit and vegetable exports to Canada.
Minimize inflation in your grocery bill with our calculator
Even if food inflation is showing up on your grocery bill, there are ways to bring down costs on your next trip to the supermarket. This calculator will help you shield your grocery cart from the pains of inflation.
Methodology
This calculator uses Statistics Canada data that tracks the average retail prices of a range of products commonly purchased by Canadian consumers. The average prices are calculated with scanner data obtained directly from the retailers. Due to factors including product rotation, quality and quantity changes and shifting consumer preferences, using average retail prices for comparisons over time has limitations. For a precise measure of price changes over time, please refer to StatsCan’s Consumer Price Index (CPI).
With reports from Matt Lundy, Mark Rendell and Erica Alini