Canada’s inflation rate cooled to seven per cent in August, Statistics Canada said Tuesday.
Economists had been expecting the rate to come in at 7.3 per cent, after inflation rose to a 40-year high of 8.1 per cent earlier this summer.
Instead, the rate decelerated by even more than expected, in large part because gasoline got much cheaper during the month.
Gas prices fell by 9.6 per cent in August from where they were the previous month. That is the biggest one-month drop in gasoline prices since April 2020, when the pandemic was just beginning.
While gasoline got a little cheaper, food prices continued their increase — the cost of groceries has risen by 10.8 per cent in the past year.
That’s the fastest increase in the typical grocery bill since 1981.
“The supply of food continued to be impacted by multiple factors, including extreme weather, higher input costs, Russia’s invasion of Ukraine and supply chain disruptions,” the data agency said.
The cost of edible fats and oils is up by almost 28 per cent in the past year, while coffee and tea prices are up by more than 13 per cent. Bakery products are another standout, up by more than 13 per cent in the past 12 months.
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On the streets of Toronto, shoppers tell CBC News about how high prices for food are taking a bite out of their family budgets.
Pedro Antunes, an economist with the Conference Board of Canada, says that while high and rising food prices are problematic, he’s seeing encouraging signs that some prices are starting to come down.
Although still up on an annual basis, prices for proteins like some frozen meat, fish, eggs and nuts were lower in August than they were in July, according to Statistics Canada.
“When we look at the commodity prices for grains and … red meat and other products, some of those prices are starting to come down,” he said.
On a monthly basis, the inflation rate fell by 0.3 per cent. That’s the biggest monthly cool-down since 2020. And so-called core inflation — which strips out volatile items like food and energy — fell to 5.2 per cent, down from 5.4 per cent the previous month.
“The relief in core inflation provides a powerful signal that the Bank of Canada’s rate hikes are having an impact,” said Tu Nguyen, an economist with consultancy RSM Canada.
But even at seven per cent, the official inflation rate is still more than twice as high as the central bank likes to see. Which means consumers and borrowers should expect even more rate hikes to come.
“Grocery prices still rise rapidly and rapid wage growth means inflationary pressures remains [so] it is not yet time to breathe a total sigh of relief,” Nguyen said.
Prince Edward Island resident Jennifer Cullen says inflation is nowhere near being under control for her family. She tries to save money any way she can, she said, and one way she’s managed to stretch those pennies is by shopping at vintage and used clothing stores.
“My kids are very active and they grow very fast, so I’m changing shoes and clothes every two months with one of my boys,” she told CBC News while browsing the aisles of Repeats Clothing in Charlottetown.
Store owner Mary Matthews says she’s noticed an uptick in sales of late, as families stretch their budgets. And while higher sales may be good for her bottom line, her costs have increased too, as her inventory costs about twice what it did last year.
“It’s hitting all of us,” Matthews said. “Everything is costing more.”
Demands for government intervention in Air Canada labour talks could negatively affect airline competition in Canada, the CEO of travel company Transat AT Inc. said.
“The extension of such an extraordinary intervention to Air Canada would be an undeniable competitive advantage to the detriment of other Canadian airlines,” Annick Guérard told analysts on an earnings conference call on Thursday.
“The time and urgency is now. It is time to restore healthy competition in Canada,” she added.
Air Canada has asked the federal government to be ready to intervene and request arbitration as early as this weekend to avoid disruptions.
Comments on the potential Air Canada pilot strike or lock out came as Transat reported third-quarter financial results.
Guérard recalled Transat’s labour negotiations with its flight attendants earlier this year, which the company said it handled without asking for government intervention.
The airline’s 2,100 flight attendants voted 99 per cent in favour of a strike mandate and twice rejected tentative deals before approving a new collective agreement in late February.
As the collective agreement for Air Transat pilots ends in June next year, Guérard anticipates similar pressure to increase overall wages as seen in Air Canada’s negotiations, but reckons it will come out “as a win, win, win deal.”
“The pilots are preparing on their side, we are preparing on our side and we’re confident that we’re going to come up with a reasonable deal,” she told analysts when asked about the upcoming negotiations.
The parent company of Air Transat reported it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31. The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
It attributed reduced revenues to lower airline unit revenues, competition, industry-wide overcapacity and economic uncertainty.
Air Transat is also among the airlines facing challenges related to the recall of Pratt & Whitney turbofan jet engines for inspection and repair.
The recall has so far grounded six aircraft, Guérard said on the call.
“We have agreed to financial compensation for grounded aircraft during the 2023-2024 period,” she said. “Alongside this financial compensation, Pratt & Whitney will provide us with two additional spare engines, which we intend to monetize through a sell and lease back transaction.”
Looking ahead, the CEO said she expects consumer demand to remain somewhat uncertain amid high interest rates.
“We are currently seeing ongoing pricing pressure extending into the winter season,” she added. Air Transat is not planning on adding additional aircraft next year but anticipates stability.
“(2025) for us will be much more stable than 2024 in terms of fleet movements and operation, and this will definitely have a positive effect on cost and customer satisfaction as well,” the CEO told analysts.
“We are more and more moving away from all the disruption that we had to go through early in 2024,” she added.
This report by The Canadian Press was first published Sept. 12, 2024.
