The waning of a factor helping to push down inflation means the Bank of Canada will be relying on a pronounced slowdown in the economy this fall to keep prices from rising more, experts say.
The central bank has indeed seen substantial progress in cooling the headline inflation figure; economists who spoke to Global News expect Tuesday’s consumer price index report from Statistics Canada will show 2.9 per cent annual inflation, down from highs of 8.1 per cent last summer.
But it’s in part because of that exact comparison — last year’s decades-high levels of inflation versus today’s mostly milder price hikes — that’s yielding inflation rates that appear relatively tame.
It’s a consequence of the so-called “base-year effect” — and its positive impact on inflation will shortly fall out of StatCan’s annual calculations.
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“A lot of the base-year effects, in terms of pushing inflation rates lower, are in the past,” says RBC’s assistant chief economist Nathan Janzen in an interview with Global News.
One of the reasons Janzen expects inflation will have ticked up by a 10th of a percentage point in July is the recent run-up in gas prices.
While Canadians might be paying a bit more at the pump as of late, prices remain largely lower than the peaks of last summer when many motorists across the country were facing down $2 per litre of regular gasoline. Those high gas prices were a major fuel for rampant inflation in the summer of 2022.
Since inflation is calculated as a comparison of prices this year from last, rising gasoline prices can still be an overall drag on this July’s headline CPI figures, Janzen explains.
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“That’s not because energy prices are particularly low — oil prices are still over US$80 a barrel — it’s just that they were substantially, substantially higher than a year ago,” he says.
The base-year effect can seem a bit like an illusion when it comes to how Canadians experience inflation, says Tu Nguyen, economist at RSM Canada.
“When we compare prices this year to last year, it might look like inflation has gone down,” she says. “Whereas for families, for households and businesses, prices are still very high.”
The base-year effect can also work in reverse, making inflation seem, well, inflated, after a year of relatively low price pressures.
While in this case the base-year effect has been a boon for the Bank of Canada in bringing headline inflation back into its one-to-three per cent target range, that particular headwind will be fading heading into the fall, experts warn.
While fuel prices began to calm in the late summer months of 2022, gas prices are continuing to rise this year heading into August.
With less help from the base-year effect going forward, annual inflation could well tick up again in the months to come, Janzen says.
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But Nguyen tells Global News that even as the base-year effect wanes in the fall, the Bank of Canada is expected to receive some support in its inflation fight thanks to the impact of its interest rate hikes to date.
Many economists are expecting a long-awaited slowdown in the economy this fall. That should see households cool spending demand, in turn putting less pressure on inflation.
That could offset the impact of a diminished base-year effect and help keep annual inflation in the Bank of Canada’s one-to-three per cent range, Nguyen argues.
The central bank is also not likely to respond forcefully to inflation pressures tied to the volatile energy market, Janzen notes.
Rather, he says the Bank of Canada will be looking more closely at its preferred core measures of inflation and shorter-term three-month gauges of pricing momentum in making its remaining rate decisions this year.
Both Janzen and Nguyen believe the signs of easing in the labour market and other aspects of the economy will be sufficient to keep the Bank of Canada on the sidelines of its rate hike cycle for the rest of the year.
Janzen notes, however, that core inflation measures have been “sticky,” and if they show signs of flaring up in the months to come, the Bank of Canada could be forced back to the table for additional rate increases.
“The Bank of Canada has one policy mandate, and that’s to target low and stable inflation, which they define as two per cent,” he says. “So they will respond if they do with higher interest rates.”
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VANCOUVER – Contract negotiations resume today in Vancouver in a labour dispute that has paralyzed container cargo shipping at British Columbia’s ports since Monday.
The BC Maritime Employers Association and International Longshore and Warehouse Union Local 514 are scheduled to meet for the next three days in mediated talks to try to break a deadlock in negotiations.
The union, which represents more than 700 longshore supervisors at ports, including Vancouver, Prince Rupert and Nanaimo, has been without a contract since March last year.
The latest talks come after employers locked out workers in response to what it said was “strike activity” by union members.
The start of the lockout was then followed by several days of no engagement between the two parties, prompting federal Labour Minister Steven MacKinnon to speak with leaders on both sides, asking them to restart talks.
MacKinnon had said that the talks were “progressing at an insufficient pace, indicating a concerning absence of urgency from the parties involved” — a sentiment echoed by several business groups across Canada.
In a joint letter, more than 100 organizations, including the Canadian Chamber of Commerce, Business Council of Canada and associations representing industries from automotive and fertilizer to retail and mining, urged the government to do whatever it takes to end the work stoppage.
“While we acknowledge efforts to continue with mediation, parties have not been able to come to a negotiated agreement,” the letter says. “So, the federal government must take decisive action, using every tool at its disposal to resolve this dispute and limit the damage caused by this disruption.
“We simply cannot afford to once again put Canadian businesses at risk, which in turn puts Canadian livelihoods at risk.”
In the meantime, the union says it has filed a complaint to the Canada Industrial Relations Board against the employers, alleging the association threatened to pull existing conditions out of the last contract in direct contact with its members.
“The BCMEA is trying to undermine the union by attempting to turn members against its democratically elected leadership and bargaining committee — despite the fact that the BCMEA knows full well we received a 96 per cent mandate to take job action if needed,” union president Frank Morena said in a statement.
The employers have responded by calling the complaint “another meritless claim,” adding the final offer to the union that includes a 19.2 per cent wage increase over a four-year term remains on the table.
“The final offer has been on the table for over a week and represents a fair and balanced proposal for employees, and if accepted would end this dispute,” the employers’ statement says. “The offer does not require any concessions from the union.”
The union says the offer does not address the key issue of staffing requirement at the terminals as the port introduces more automation to cargo loading and unloading, which could potentially require fewer workers to operate than older systems.
The Port of Vancouver is the largest in Canada and has seen a number of labour disruptions, including two instances involving the rail and grain storage sectors earlier this year.
A 13-day strike by another group of workers at the port last year resulted in the disruption of a significant amount of shipping and trade.
This report by The Canadian Press was first published Nov. 9, 2024.
The Royal Canadian Legion says a new partnership with e-commerce giant Amazon is helping boost its veterans’ fund, and will hopefully expand its donor base in the digital world.
Since the Oct. 25 launch of its Amazon.ca storefront, the legion says it has received nearly 10,000 orders for poppies.
Online shoppers can order lapel poppies on Amazon in exchange for donations or buy items such as “We Remember” lawn signs, Remembrance Day pins and other accessories, with all proceeds going to the legion’s Poppy Trust Fund for Canadian veterans and their families.
Nujma Bond, the legion’s national spokesperson, said the organization sees this move as keeping up with modern purchasing habits.
“As the world around us evolves we have been looking at different ways to distribute poppies and to make it easier for people to access them,” she said in an interview.
“This is definitely a way to reach a wider number of Canadians of all ages. And certainly younger Canadians are much more active on the web, on social media in general, so we’re also engaging in that way.”
Al Plume, a member of a legion branch in Trenton, Ont., said the online store can also help with outreach to veterans who are far from home.
“For veterans that are overseas and are away, (or) can’t get to a store they can order them online, it’s Amazon.” Plume said.
Plume spent 35 years in the military with the Royal Engineers, and retired eight years ago. He said making sure veterans are looked after is his passion.
“I’ve seen the struggles that our veterans have had with Veterans Affairs … and that’s why I got involved, with making sure that the people get to them and help the veterans with their paperwork.”
But the message about the Amazon storefront didn’t appear to reach all of the legion’s locations, with volunteers at Branch 179 on Vancouver’s Commercial Drive saying they hadn’t heard about the online push.
Holly Paddon, the branch’s poppy campaign co-ordinator and bartender, said the Amazon partnership never came up in meetings with other legion volunteers and officials.
“I work at the legion, I work with the Vancouver poppy office and I go to the meetings for the Vancouver poppy campaign — which includes all the legions in Vancouver — and not once has this been mentioned,” she said.
Paddon said the initiative is a great idea, but she would like to have known more about it.
The legion also sells a larger collection of items at poppystore.ca.
This report by The Canadian Press was first published Nov. 9, 2024.
