According to new data from Statistics Canada (StatCan), the country’s food inflation rate is now at its highest level in more than two years.
The annual inflation rate jumped to 2.4% in December of last year following the end of the federal government’s tax holiday, although economists had expected the rate to remain stable at 2.2%.
Distribution and Food Canada researcher Sylvain Charlebois said that the increase in food inflation at retail stores was due to retailers asking suppliers not to raise prices.
He also explained that the implementation of the 17-day GST holiday in December 2024 has provided “short-term relief” for Canadians.
However, the challenges of this temporary tax holiday have opened the door to opportunistic pricing and greater volatility.
The development has pushed Canada's food inflation to its highest level since August 2023.
More worryingly, Canada now has the highest food inflation rate of 6.2% among other G7 members, followed by Japan (6.1%), the United Kingdom (UK) (4.2%), Italy (2.6%), France (1.7%) and Germany (1.4%).
Meanwhile, StatCan also noted that Ottawa's move to eliminate the GST on some goods for two months starting in mid-December 2024 had reduced prices for dining out, buying alcohol and children's toys in the previous year.
However, since the discounts are not included in the year-on-year comparison, it has pushed the Consumer Price Index (CPI) to record higher readings at the end of the year.
This situation has caused the price of food in restaurants to increase sharply by 8.5% in a year.
Overall, the cost of food purchased from grocery stores has increased by 5% per year, although StatCan said that price levels have generally remained unchanged month-on-month.
