Canada's inflation rate rises to new 30-year high of 4.8%
The Consumer Price Index increased at an annual pace of 4.8 per cent in December, as sharply higher prices for food led to the cost of living going up at its fastest rate since 1991.
CPI grew at a faster pace compared with November, due in part to higher prices for food (+5.2%), passenger vehicles (+7.2%) and homeowners' home and mortgage insurance (+9.3%). Excluding gasoline, the CPI rose 4.0% year over year.
On a monthly basis, the CPI fell 0.1% in December, following a 0.2% increase in November. This was the first monthly decline since December 2020.
On a seasonally adjusted monthly basis, the CPI was up 0.3%.
Prices rose in all eight major components on a year-over-year basis in December. Transportation and shelter prices contributed the most to the increase in the CPI.
Year over year, prices for services (+3.4%) rose at a faster pace in December compared with November (+2.9%). Prices for goods (+6.8%) grew at a slightly slower pace than in November (+6.9%), moderating the price growth in the CPI. Gasoline prices rose to a lesser extent in December (+33.3%) than in November (+43.6%), contributing to the slowdown in goods prices.
Prices for groceries continue to climb
Grocery prices continued to climb in December, rising 5.7% year over year, the largest yearly increase since November 2011. Prices for fresh fruit (+5.6%), including apples (+6.7%), oranges (+6.6%) and bananas (+2.5%), increased on a year-over-year basis. Unfavourable weather conditions in growing regions, as well as supply chain disruptions, led to higher prices for households.
In addition, prices for bakery products rose 4.7% year over year, as drought during the summer months reduced wheat crop yields, in turn raising prices for shoppers.
Prices for durable goods increase at a faster pace
On a yearly basis, prices for durable goods rose at a faster pace in December (+5.7%) than in November (+5.5%). A durable good is a product that can be used repeatedly or continuously over a period of more than one year. Consumers who purchased a new vehicle in December paid 7.2% more than those who did so in December 2020, as the global shortage of semiconductor chips continued to elevate prices.
Consumers who purchased household appliances, like refrigerators and freezers (+13.9%) and laundry and dishwashing appliances (+10.4%), paid 8.9% more in December 2021 compared with December 2020. This was the largest yearly gain since June 1982. The movement is largely attributable to an increase in demand amid global supply chain disruptions.
Homeowners pay more for home and mortgage insurance
With the recent increases in construction costs, mainly due to higher prices for building supplies, Canadian homeowners paid 9.3% more for home and mortgage insurance in December 2021 compared with December 2020. An increase in the frequency and severity of weather-related claims, such as those related to fires and flooding, may have also contributed to higher rates.
Gasoline prices increase at a slower rate year over year
Year over year, gasoline prices rose to a lesser extent in December (+33.3%) than in November (+43.6%).
On a monthly basis, Canadian drivers paid less at the pumps as gasoline prices fell 4.1%, the largest monthly decline since April 2020. The tightening of public health restrictions in response to the new Omicron variant weighed on demand for gasoline.
Prices for air transportation rise amid strong demand for air travel
Month over month, Canadians paid 24.7% more for airfare in December, after a 3.1% drop in November. Strong demand for air travel during the holiday season contributed to the monthly price increase, which was similar to the movement in December 2019 (+23.4%), before the pandemic.
Year over year, prices rose at a faster pace in December than in November in four provinces. The increase in Alberta (+4.8%) was largely attributable to higher prices for natural gas (+35.5%) and electricity (+33.8%). Ontarians paid more for household appliances (+11.8%), contributing to the price growth in Ontario (+5.2%) in December.
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