Higher food prices help push Canada's inflation rate to 1.9% in March



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The cost of living rose at an annual rate of nearly two percent in March, according to Canadian statistics, as increases in food, rent and mortgage prices were slightly offset by cheaper gasoline.

The data agency said on Wednesday that Canada's consumer price index rose from 1.5% in February to 1.9% in March. The figure of 1.9 percent was in line with what economists had expected.

All eight major components that the index tracks were larger during the month, so the overall rate could have been even higher were it not for the cheaper gas. Gas prices rose in March from the extremely low level in February, but on an annualized basis they are still 4.4% cheaper than they were a year ago.

If energy prices are withdrawn, the global inflation rate would have reached 2.2%, according to Statistics Canada.

Food an important factor

Food was a big reason for the jump in inflation, as the price of fresh vegetables rose 15.7% last year, while fresh fruit prices rose almost 8.6%.

The price of many types of fresh produce has increased over the past year:

  • Apples are up 13.92 percent.
  • Oranges increased by 8.57%.
  • Potatoes are up 13.92 percent.
  • Tomatoes are up 15.98 percent.
  • Lettuce grew 19.25%, largely due to a massive outbreak of E. coli on Romaine lettuce last year that drastically cut supply and made the price of what remained.

Contamination of lettuce made the price of all kinds of lettuce increase last year. (Mark J. Terrill / Associated Press)

The price of meat, meanwhile, rose much less, only 1.85% last year. And dairy products and eggs rose 2.46%. The price of baked goods rose just under 2% last year.

Overall, food price inflation accelerated to 3.6 percent in March from 3.2 percent in the previous month.

Sylvain Charlebois, a professor of food distribution and politics at Dalhousie University in Halifax, said that food prices are always more volatile than some other categories, but recent leaps are "excessive" even by their own high standards.

"When you look at the new food guide and the amount of fruits and vegetables we're being encouraged to eat, surely those prices are discouraging," he said in an interview.

Part of the reason the country is so vulnerable to food inflation is because most of what Canadians eat comes from outside the country. That's why something like E. coli contamination of Romaine lettuce that started in the US and spread through Canada can have such a big impact.

"The only solution we have is to produce more in the country to make us less vulnerable to systemic factors," he said. adding that he expects product prices to stabilize somewhat during the summer as the short growing season in Canada begins to produce fresh fruits and vegetables.

While there has been some relief from meat prices, Charlebois warns that a growing problem with pork in China may soon cause an increase in Canada's exports, which would raise prices here.

"This is the new normal for all of us," he said.

Other prices also rising

In addition to food, other major factors in the higher cost of living include mortgage costs, which increased by 8.1% last year, and rents, which increased by 2.7%. Car insurance premiums also increased 5.6% last year, according to the data agency.

Regionally, the inflation rate rose in all provinces, from a high of 2.6% in British Columbia to a low of 1% in Prince Edward Island.

Toronto-Dominion Bank economist James Marple noted that much of the increase in inflation is related to temporary factors, which means he expects the number to decline from now on.

"Inflation returned a little in March, but mainly when price declines fell in the calculation year by year," he said.

The Canadian dollar lost ground last year, and this always has an impact on Canadian product prices – especially food – because it's both imported. But as long as the loonie remains stable, this impact will likely be silenced in the coming months.

"Assuming a relatively stable loonie going forward, that impact will not last," he said.

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