FED UP: Grocery price punishment continues higher than general inflation

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The daily punishment for Canadians walking the grocery aisles continues as food prices gallop even faster than other prices.

“Canadians continued to feel the pinch from higher food prices,” Statistics Canada said in its monthly snapshot of inflation.

Food prices are rising much faster than overall inflation — which is still high at 6.9 per cent.

In September, grocery prices grew by 11.45 — the fastest pace year-over-year since August 1981.

Compared to a year ago, Canadians paid 7.6 per cent more for meat, 9.7 per cent more for dairy, almost 15% more for bakery products, and almost 12% more for fresh vegetables.

This week both Loblaws and Metro said they would be freezing prices of some products for the next three and a half months.

“Obviously they are concerned about the affordability of food for Canadians,” said Retail Council of Canada senior vice-president Karl Littler.

But he said grocers are weathering most of the criticism — despite dealing with higher costs themselves from producers in the supply chain.

“Their own fuel costs have risen, their own labour costs have risen, the price of wheat has gone through the roof, the price of meat has gone through the roof,” said Littler. “As they take on some of those costs they are then passing those on in the form the prices they charge grocers.”

Sylvain Charlebois, Director, Agri-Food Analytics Lab at Dalhousie University, applauded the move by the two major grocers — despite also raising questions about possible collusion among grocers.

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“There’s been some criticism of the timing. But I think right now Canadians are looking for some help. And they’ll take all the help they can get,” Charlebois said.

Most economists see sticky prices as giving the Bank of Canada an even greener light to raise interest rates — which are also leaving borrowers in a squeeze.

“Today’s report emphasizes the need for a hefty 50 basis point (bp) hike next week in the BoC’s overnight rate. We expect the bank is getting closer to a pause on rate hikes, once it reaches 4 per cent by the end of the year,” said Leslie Preston, managing director and senior economist at TD.

Because of tough talk from the Bank of Canada, weakness in the loonie, and the strong likelihood that the U.S. Federal Reserve hikes by 75 bps, “We are now expecting a like-sized 75 bp hike next week from the Bank,” wrote Doug Porter, Chief Economist and Managing Director, BMO Economics, in a note to clients.

slaurie@postmedia.com