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Canada’s inflation hits 6.7% as the global oil shock sets in

REAL ECONOMY BLOG | April 20, 2022

Authored by RSM Canada


Inflation in Canada hit 6.7% in March, up from 5.7% in February and the largest year-over-year increase since January 1991 as supply chain disruptions, the war in Ukraine and a reopening economy all had an effect.

Excluding gasoline, inflation rose 5.5% from a year ago, the fastest since the index of inflation for all items excluding gasoline was introduced in 1999, according to government data released Wednesday.

The effects of the war in Ukraine and the oil supply shock are now being felt across the economy, with gasoline surging by 11.8% from February. Higher gasoline prices also drove up transportation costs, which helped push up prices of all other consumer goods. Food prices, for example, went up 8.7% on a year-over-year basis.

Canada CPI

Prices of durable goods were not far behind either. Car prices rose by 7% on a yearly basis, partly because of the availability of 2022 model year vehicles, which are higher priced, and partly because of the continued shortage of semiconductor chips.

Similarly, the global supply chain disruptions continued in the furniture sphere, as those prices rose 13.7% on a yearly basis.

Although gasoline prices have since stabilized, the future remains uncertain. If conditions of the war worsen, and a Russian oil ban occurs across Europe, a remote but distinct possibility, we can count on gasoline prices rising more.

Food prices in particular will stay high as the war is causing global shortages of grains, cooking oil and fertilizer and threatening global hunger crises.

As public health measures ease across Canada and the world, the tourism and entertainment sectors are having an influx of customers not seen since 2019, before the pandemic.

Businesses are struggling to hire staff and meet the pent-up demand. As consumers are eager to travel and fill arenas and venues, the prices of accommodation, restaurant dining and entertainment will continue to increase this summer.

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This article was written by Tu Nguyen and originally appeared on 2022-04-20 RSM Canada, and is available online at https://realeconomy.rsmus.com/canadas-inflation-hits-6-7-as-the-global-oil-shock-sets-in/.

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