People shop in the produce section of a grocery store on Sept. 12, in Los Angeles, Calif.Mario Tama/Getty Images
The latest U.S. inflation report for August confirmed what American grocery store shoppers may have noticed last month in the aisles: Food inflation is cooling fast.
Even though the U.S. headline inflation rate picked up last month, that was largely because of surging gasoline prices, the U.S. Bureau of Labour Statistics said Wednesday. Meanwhile food price inflation, in particular the cost of items bought at grocery stores, continued to slow to 3 per cent, far below the frantic 13.5 per cent price spike of a year ago.
It’s been a much slower road back to normal for food price inflation in Canada, though economists say next week’s release of consumer price index data for August may finally show signs of a U.S.-style reprieve.
Critics of Canada’s giant grocery chains insist a lack of competition and price gouging are to blame for stubbornly higher food inflation. However pretax profit margins for food and beverage stores are up just 1.3 percentage points since 2020 and explain only a small part of the 23-per-cent jump in food prices, according to a new report by Stephen Brown, deputy chief North America economist at Capital Economics.
Instead he points to higher costs for industrial food producers in Canada – driven by a weakened Canadian dollar and relatively steeper diesel prices – which continued to accelerate long after U.S. producers saw their costs fall.
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The good news is Canada’s food producer price index slowed to just 2.5 per cent in July, and that should begin to translate into lower food price inflation for consumers. “There is scope for inflation for food from stores to fall sharply in the coming months,” Mr. Brown wrote. “The outlook for food price inflation should help to soothe concerns about the inflation impact of higher oil prices.”
Editor’s note: An earlier version of this story incorrectly stated that the slowing of Canada's food producer price index should begin to translate into lower food prices for consumers. This version has been updated.