Higher food prices help push Canada's inflation rate up to 1.9% in March

The cost of living rose at an annual rate of almost two per cent in March, Statistics Canada says, as increases in the price of food, rent and mortgages were slightly offset by cheaper gasoline.

The data agency said Wednesday that Canada's consumer price index rose from 1.5 per cent in February to 1.9 per cent in March. The 1.9 per cent figure was in line with what economists were expecting.

All eight major components that the index tracks were higher during the month, so the overall rate could have been even higher were it not for cheaper gas. Gas prices actually rose in March from February's extremely low level, but on an annualized basis they are still 4.4 per cent cheaper than they were a year ago.

If energy prices are stripped out, the overall inflation rate would have been as high as 2.2 per cent, Statistics Canada said.

Food a major factor

Food was a big reason for the jump in inflation, as the price of fresh vegetables has risen by 15.7 per cent in the past year, while fresh fruit prices are up by almost as much — 8.6 per cent.

The price of many types of fresh produce has soared over the past year:

• Apples are up by 13.92 per cent.
• Oranges are up by 8.57 per cent.
• Potatoes are up by 13.92 per cent.
• Tomatoes are up by 15.98 per cent.
• Lettuce is up by 19.25 per cent, in large part because of a massive E. coli outbreak in Romaine lettuce last fall that drastically cut supply and caused the price of what was left to spike.

The price of meat, meanwhile, has gone up by much less, just 1.85 per cent in the past year. And dairy and eggs have gone up by 2.46 per cent. The price of baked goods has gone up by just under two per cent in the past year.

Overall, food price inflation accelerated to 3.6 per cent in March from 3.2 per cent the previous month.

Sylvain Charlebois, a professor of food distribution and policy at Dalhousie University in Halifax, said food prices are always more volatile than some other categories, but recent jumps are "excessive" even by their own high standards.

"When you look at the new food guide and the amount of fruits and vegetables we are being encouraged to eat, certainly these prices are discouraging," he said in an interview.

Part of the reason why the country is so vulnerable to food inflation is because most of what Canadians eat comes from outside the country. That's why something like the E. coli contamination of Romaine lettuce that started in the U.S. and spread across Canada can have such a big impact.

"The only solution we have is to produce more in the country so we become less vulnerable to systemic factors," he said. adding that he expects produce prices to stabilize a little through the summer once the short growing season in Canada starts producing fresh fruits and vegetables.

While there was some relief with prices for meat, Charlebois warns that a growing problem with pork in China could soon cause a surge in exports from Canada, which would raise prices here.

"This is the new normal for all of us," he said.

Other prices rising, too

Aside from food, other big factors in the higher cost of living include mortgage costs, which have risen by 8.1 per cent in the past year, and rent, which has increased by 2.7 per cent. Car insurance premiums have also risen 5.6 per cent in the past year, the data agency said.

Regionally, the inflation rate rose in every province, from a high of 2.6 per cent in British Columbia to a low of one per cent in Prince Edward Island.

Toronto-Dominion Bank economist James Marple noted that a big part of the uptick in inflation is related to temporary factors, which means he expects the number to inch lower from here on.

"Inflation made a bit of a comeback in March, but mostly as past declines in prices dropped out of the year-on-year calculation," he said.

The Canadian dollar has lost ground over the past year, and that always has an impact on the prices of goods in Canada — especially food — because so much is imported. But as long as the loonie holds steady, that impact is likely to be muted in the coming months.

"Assuming a relatively stable loonie going forward, this impact will not last," he said.