B.C.’s inflation rate is a “puzzler” no more.
After trailing the national average for months, consumer prices on the West Coast have overtaken the national average, according to data released Wednesday by Statistics Canada.
B.C.’s annual inflation rate now stands at 8.1 per cent compared with Canada’s 7.7 per, making it the highest rate among the large provinces.
The national average, meanwhile, is now the highest it’s ever been since 1983.
This past spring an economist at TD Bank Group described B.C.’s lower inflation rate as a “puzzler” and a “curious case.”
“Job markets are among the tightest in the country and the economic backdrop is generally solid, yet inflation has lagged that of Canada. This is not a typical phenomenon,” TD economist Rishi Sondhi said in an April note.
He pointed out that food and energy prices make up the smallest share of the Consumer Price Index basket out of all the provinces at just over 20 per cent. Sondhi said this shielded the province from rapid inflation in those categories. He also found that food inflation has been slower in B.C. due to restaurant menu prices remaining relatively stable.
Flash forward to the latest data reflecting May consumer prices and B.C. has done some considerable catching up.
Overall, Canadians are paying 48 per cent more for gasoline, 9.7 per cent more on grocery store bills and 6.8 per cent more for restaurant menu items compared with May 2021.
Staples like cooking oil (+30 per cent) and fresh veggies (+10.2 per cent) are among the notable items consumers are shelling out more for.
“If you aren't over 40, you have never lived through inflation like this, and unfortunately, we are not expecting much of a reprieve going forward,” TD economist Leslie Preston said in a note Thursday.
“Inflation is expected to remain elevated through 2022 as outlined in our recent forecast. On the shelter side, we are likely to see a continuation of rent price increases alongside rising mortgage interest costs. This will be balanced against the impact of declining house prices.”
RBC economist Claire Fan said Wednesday’s data further cements the odds the Bank of Canada will raise its overnight rate 75 basis points next month to 2.25 per cent in a bid to tamp down on inflation. This comes after the U.S. Federal Reserve hikes its key rate 75 basis points earlier this month.
“There have been early signs of easing supply chain constraints, as ocean transport time narrows and container shipping costs have ticked lower in recent months,” she said in a note. “Central banks globally have been, and are expected to continue to, reign in monetary support faster to tame overheating consumer demand and ease inflation momentum.”
CIBC senior economist Andrew Grantham said in a note he expects inflation to “finally moderate” in either the late summer or early fall.