Canada experienced its sharpest slowdown in inflation in almost three years in February, but the price of food remained stubbornly high.
Statistics Canada reported Tuesday the Consumer Price Index was up 5.2% in February, compared to the 5.9% gain posted in January – the largest deceleration in the headline CPI since April 2020. However, food purchased from stores still rose 10.6% year over year in February, marking the seventh consecutive month of double-digit increases. In January, food prices were up 11.4% year over year.
“Continuing to put upward pressure on grocery prices are supply constraints amid unfavourable weather in growing regions, as well as higher input costs such as animal feed, energy and packaging materials,” StatsCan said.
Price growth for some food items such as cereal products (+14.8%), sugar and confectionary (+6%) and fish, seafood and other marine products (+7.4%) accelerated on a year-over-year basis in February. In contrast, price growth for other food items slowed, on a year-over-year basis in February compared with January. For example, meat prices showed a 6.2% gain in February, versus a 7.3% advance in January. Bakery products were up 13.9% in February, down from a 15.5% increase the previous month. Prices for dairy products also rose to a lesser extent on a year-over-year basis in February (+9.1%) compared with January (+12.4%).
For the second consecutive month StatsCan attributed the decline in the inflation rate to the so-called “base-year effect,” which is attributable to a steep monthly increase in prices in February 2022.
The annual inflation rate peaked at 8.1% in June 2022, but has been declining since then.
The Bank of Canada had been aggressively hiking interest rates over the past year in a bid to return the national inflation rate to its preferred target of around 2% but left its current rate of 4.5% unchanged earlier this month. In its accompanying statement, the Bank said it believes inflation is headed in the right direction – expected to further decline to about 3% late in 2023 – but it added it remains resolute in its goal of tamping down inflation.