P.E.I.'s high inflation rate tied to STRs, price of gas, experts say

Prince Edward Island's inflation rate of six per cent in May was the highest in the country, according to the latest report from Statistics Canada. 

The national inflation rate was 3.6 per cent. The Island's normal inflation rate is in the two per cent range. 

Andrew Barclay, an analyst with StatsCan, said in comparing May 2020 to 2021, most of P.E.I.'s inflation is being driven by a base year effect for rent and the price of gas.

"So you're basically comparing a very low number from last year to the number that comes out this year," he said in an interview with Island Morning host Laura Chapin.

"That's why the number is so high for both rent and as well for fuel oil, specifically."

Barclay said Islanders have seen some of the largest rent increases in the country, after New Brunswick. 

He believes those could be caused by people moving to P.E.I. from central Canada, and also possibly short-term rental units being taken off the market last May, and then some of them returning to short-term rentals this May.

In May 2020, the price of regular, self-serve gasoline was below 90 cents per litre before an increase on May 22. Currently on P.E.I., the price is more than $1.30.

Expected to settle down

UPEI economist Jim Sentance said the base year effect is likely the biggest factor driving inflation on P.E.I. He said P.E.I. had the biggest drop in the consumer price index last May because it shut down more than most other provinces. Sentance said what we're seeing now are prices coming back to normal. 

As well, he said P.E.I. is not immune to the worldwide price spikes related to supply chain issues for products such as lumber. 

Sentance said he expects inflation to settle down over the long run.

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