Canadians will find out Tuesday whether inflation is showing clear signs of easing nationwide when Statistics Canada releases July’s Consumer Price Index (CPI).
Economists at RBC Economics predict the country likely hit peak inflation in June, forecasting July’s annual rate will fall to 7.7 per cent compared with 8.1 per cent a month earlier.
But has B.C already hit peak ahead of the rest of Canada?
Despite the West Coast experiencing inflation levels not seen in decades, this surge in B.C. consumer prices notably trailed national figures for most of 2022.
It was a trend one TD economist described as a “puzzler” and a “curious case.”
The B.C. inflation surged by a remarkable 1.4 percentage points to land at 8.1 per cent between April and May, overtaking the national rate (7.7 per cent) for the first time this year.
The national rate then grew from 7.7 per cent to 8.1 per cent between May and June. B.C. inflation fell from 8.1 per cent to 7.9 per cent during that same period.
If next week’s CPI numbers show B.C. inflation has fallen for a second consecutive month it would be a clear sign the province hit peak inflation in May – one month ahead of the rest of Canada if RBC’s forecasts are correct.
“The rapid rise in Canadian inflation likely slowed in July as global commodity prices fell – mirroring a drop in the U.S. inflation earlier this week,” RBC assistant chief economist Nathan Janzen and economist Carrie Freestone said in an Aug. 12 note.
U.S. inflation hit 8.5 per cent in July, down from 9.1 per cent in June, according to the U.S. Bureau of Labor Statistics.
“There continue to be signs that global inflation pressures are easing off,” the RBC economists said in their note.
“Oil prices are down 25 per cent from early June. Global freight shipping costs and times, by air and ocean, have fallen significantly over the past few months. And on the domestic front, though higher interest rates are pushing up mortgage payments, home-buying costs (which have contributed substantially to price growth over the last year) have shifted from record monthly increases over the winter to declines in the spring and summer.”
B.C. kicked off the year with an annual rate of inflation at 4.3 per cent in January –substantially lower than the nation’s 5.1 per cent.
The gap between B.C. and Canada, respectively, continued for months:
- February: 4.7 per cent vs. 5.7 per cent
- March: 6 per cent vs. 6.7 per cent
- April: 6.7 per cent vs. 6.8 per cent
“[B.C.] job markets are among the tightest in the country and the economic backdrop is generally solid, yet inflation has lagged that of Canada. This is not a typical phenomenon,” TD economist Rishi Sondhi said in an April 28 note.
He pointed out that food and energy prices make up the smallest share of the CPI basket out of all the provinces at just over 20 per cent. Sondhi said this shielded the province from rapid inflation in those categories.
He also found that food inflation had been slower in B.C. due to restaurant menu prices remaining relatively stable.
“However, the biggest wedge between Canada and the West Coast province is in transportation costs, as gasoline prices haven't grown as sharply [as] the latter. In addition, there was a steep cut to vehicle insurance premiums in B.C. last year, lowering vehicle operating costs.”