Canada’s inflation rate hits a new 31-year high of 6.7%

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Canada’s inflation rate rose to 6.7% in March, much higher than economists expected and one percentage point higher than the 30-year high already reached in February.

Statistics Canada reported Wednesday that all eight categories of the economy the data agency tracks rose, from food and energy to housing and transportation costs.

“The surge in prices during the month of March is the largest monthly increase since January 1991, when the goods and services tax was introduced,” noted Desjardins Group economist Royce Mendes.

While the cost of just about everything is rising rapidly, transportation costs lead the way, rising 11.2% over the past year. A big reason for the increase is the 39.8% rise in gasoline prices since March of last year.

Gasoline prices soared in March, largely due to Russia’s invasion of Ukraine, which threw global supply into chaos. Although they’ve come down a bit since then, at some point last month many Canadian cities saw their average gas price per liter hit $2 for the very first time.

High gas prices are having an outsized impact on headline inflation, as the cost of shipping and transportation adds to the cost of everything else, from grocery bills (up 8.7% ) to the price of durable goods such as furniture (up 13.7%). and even airline tickets (up 8.3%).

More expensive services too

As the costs of everything that needs to be transported rise, the service sector is not immune to the current inflationary pressure.

The overall price of services rose 4.3% over the past year, from 3.8 in February, but as TD Bank economist Leslie Preston noted, the main factor was not the prices at the pump, it was the easing of COVID-related health restrictions driving up demand for close-contact services like restaurants and other in-person events.

“Pricing pressures in other areas of the economy are showing more heat for both goods and services,” she said. “Inflation is expected to remain above the Bank of Canada’s target range through 2023, reducing consumer purchasing power and driving up interest rates.”

Few things get cheaper

While the vast majority of goods and services have become more expensive, some things have been cheap, although not nearly enough to offset the rise everywhere else.

They include a 5.4% decrease in the cost of servicing a mortgage loan, a 6.2% decrease in the cost of car insurance, a 2.5% decrease in the cost of telephone bills and a strong 28% reduction in the cost of car registration fees.

The main reason for the drop is the Ontario government’s decision to scrap the vehicle registration tax, Statscan noted.

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