Food prices ruin everything

Another inflation report, another mixed bag of news. 

What happened: The annual inflation rate slowed to 6.9%, down from 7% last month, mostly thanks to falling gas prices, but is still above what most experts expected. The core inflation rate (which excludes energy and food prices) actually rose to 5.4% from 5.3%. 

  • breakdown of cities and provinces shows inflation is highest in PEI and Manitoba (8.4% and 8.1%, respectively) while Newfoundland and Labrador and Alberta fared the best (6.1% and 6.2%, respectively), followed by Quebec and Ontario.  

Why it matters: Higher-than-the-2%-target inflation numbers make it more likely that the Bank of Canada will announce another 0.75% hike at their next rate decision on October 26. 

But let’s unpack the issue of food inflation. Remember how earlier this week Loblaw announced a price freeze on No Name products? It turns out food prices are continuing to contribute to inflation, so a move that would alleviate some scrutiny makes a lot of sense. 

  • A Metro spokesperson chimed in to share that, actually, everyone freezes prices around the holidays (a Loblaw spokesperson denied it was an industry practice). 
     
  • Whether or not the move was a big PR stunt or not, Loblaw maintains that price hikes to date are thanks to higher supplier costs for shipping, ingredients and packaging. 

What’s next: As a parliamentary inquiry into big grocer’s profits kicks off, supermarket CEOs will likely stay in the hot seat until they can explain 1) why the cost of groceries is outpacing everything else and 2) how they’re achieving record profits while that’s happening.

There may be a bit of truth to the argument that profits are a result of consumers flocking to high-margin No Name products and high-priced pharmacy products, but only time will tell.