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The annual rate of inflation finally slowed down in January 2023. It was believed that the Bank of Canada would decide to pause interest rate hikes to help the Canadian economy cool.
Statistics Canada released its consumer price index report last Tuesday, claiming that inflation rates decreased from 6.3 percent in December to 5.9 percent in January. Why are food prices still rising despite slowing inflation in Canada? Keep on reading to find out the answer.
Inflation Rate in Canada Today
According to Statistics Canada, the inflation rate slowed to 5.9 percent this month. The economists expected it to be 6.2 percent as in December, but this figure decreased. Yet, the prices of food and groceries remain high and keep on rising at a fast speed despite lowering inflation. And it is bad news for everyone, especially for unemployed in Canada, because it will have a bad impact on the financial situation.
Besides, home loan rates also tend to increase. The Bank of Canada states that mortgage interest rates were 21.2 percent in January. This is considered the highest rate since 1982.
The first half of 2023 showed increasing rates of inflation. Nowadays, the federal agency states that these rates will slow down and lower gradually. Canada saw a similar rate of inflation in February 2022.
The last time when this rate amounted to 5.7 percent. Hence, the lowering rates in January became a sudden surprise for economists. They claim that inflation will keep on decreasing, helping the economy to cool and boost gradually.
No Slowdown in Food Prices
This chart shows the 12-month change in the Consumer Price Index and CPI excluding food and energy. We can notice that CPI was 1.7 in January 2018 compared to 5.9 in January 2023. The CPI, excluding food and energy, was 1.5 in January 2018 compared to 4.9 in January 2023. The lowest CPI was in May 2020 during the global pandemic, when this figure amounted to -0.4.
Source: https://www150.statcan.gc.ca/n1/daily-quotidien/230221/cg-a001-png-eng.htm
The first half of 2022 saw rapid price growth of groceries as Russia invaded Ukraine. Nowadays, experts suggest that the annual inflation rate will keep slowing during the next few months.
However, it doesn’t mean consumer prices will go down as well. Canadians were hoping to see noticeable changes in food prices as inflation lowered. Instead, food prices increased by 11.4 percent in one month.
Prices for vegetables, bakery goods, and meat increased faster than usual. The war in Ukraine and poultry flu are among the top reasons grain and vegetable oil prices have increased.
Moreover, gasoline prices also boosted in January 2023 compared to the previous month. Economists state that the CPI increased by 0.5 percent this month after lowering by 0.6 percent in December.
Here is where the CPI changed the most (December figures in brackets):
- Manitoba: 6.9 percent (8.0)
- Nova Scotia: 6.9 percent (7.6)
- Prince Edward Island: 7.0 percent (7.7)
- Saskatchewan: 6.0 percent (6.7)
- Ontario: 5.6 percent (6.0)
- Alberta: 5.0 percent (6.0)
Frozen and fresh chicken is especially expensive these days. Its price increased by 9 percent from December. It happened due to the effects of avian flu, supply issues, and seasonal demand.
As a result, the cost of eating out also jumped as takeout and fast food also became pricey these days. Rising food prices make it even harder for Canadian consumers to make ends meet.
Here are 5 food items that became cheaper in January compared to the previous month:
- Lettuce: 5.8%
- Canned fish: 3.3%
- Cereal: 2.7%
- Rice and rice-based mixes: 1.9%
- Oranges: 1.8%
Best Ways to Strengthen Your Finances
As food prices keep on going up, Canadians need to look for ways to be resilient during this economic uncertainty and improve their financial stability. The economic cycle is full of ups and downs. Hence, even if the inflation rate lowers, grocery prices may remain stable and even increase. Here is what you can do to strengthen your personal finances:
1. Check Your Budget
Review your current budget. If you don’t have one, it’s time to establish it. Check your spending categories and the things that you purchase most frequently. While you may definitely have some obligatory spending categories, there might be certain things you can omit to cut down your expenses. Negotiate lower prices for your insurance or home bills and review your subscriptions. Review your budget every once in a while to notice what can be altered.
2. Make an Emergency Fund
It’s challenging to stay financially afloat if you don’t have any emergency savings. These funds can’t be used for planned expenses such as holidays or shopping for clothes. Your emergency fund is your safety cushion for unforeseen situations and events such as sudden illness or unemployment. Things you can’t foresee may be covered using these emergency savings instead of going to the bank and taking out a loan.
3. Repay the Debt
Finally, think about ways to minimize or pay your current debt off. It can be really stressful to have several types of debt. Besides, it makes your budget limited. Consider using fewer credit cards, paying down the monthly balance, and repaying any loans you might have.
There are several debt payoff strategies that can be helpful. You may try the avalanche strategy and tackle the largest debt first. Otherwise, you may use the snowball method and begin with the smallest debt. Select the best debt repayment method for you and helps you reach monetary independence.
The Bottom Line
Despite the fact that the rate of inflation lowered in January 2023, food prices keep on increasing. This tendency isn’t favorable for Canadian consumers, so they need to adapt to rising prices and prepare their budgets.
Food prices, which comprise food from restaurants and groceries, increased each year in January gradually. It was driven by annual growth in meat prices as well as supply issues and avian flu.
Food bought from restaurants also increased quicker, rising 8.2% in January compared to a 7.7% boost in December. Using special tips and strategies may help Canadians be resilient to such economic uncertainty.
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