Inflation rate 6.9% in September as grocery bills continue to climb

Statistics Canada says the annual inflation rate dropped slightly in September to 6.9 per cent but the cost of groceries continues to climb.

In its latest consumer price index report, the federal agency says the slight deceleration from 7.0 per cent in August is mostly attributed to lower gas prices, which fell by 7.4 per cent in September.

INFLATION…coming in hot…

-Canada CPI "cools" to 6.9% in September y/y (est. 6.7%)
-Core Inflation rises 4.7%
-Grocery costs up 11.7% (biggest yearly gain since 1981)

Will it be another + 50, 75 or 100bps for the Bank of Canada next week?

— Mike Eppel (@eppman) October 19, 2022

Grocery prices rose at the fastest rate since August 1981, with prices up 11.4 per cent compared with a year ago. Prices for bakery products were up almost 15 per cent, while the cost for fresh fruits and vegetables rose by nearly 12 per cent.

Statistics Canada said food prices have outstripped the overall inflation rate for 10 consecutive months.

The deceleration in headline inflation was smaller than what was expected, while the core reading of inflation remained at north of five per cent.

For homeowners or prospective buyers, higher interest rates are pushing up the cost of mortgage interest, while other costs rise at a slower pace.

The Bank of Canada has been combating high inflation with higher interest rates.

It will be keeping an eye on the latest Consumer Price Index data, paying close attention to its preferred core measures of inflation, ahead of its next interest rate announcement on October 26.

According to Statistics Canada, the core measures, which tend to provide less volatile readings, were unchanged from August.

Since March of this year, the central bank has raised its key interest rate fives times, from 0.25 per cent to 3.25 per cent. For the upcoming rate announcement, economists are forecasting a hike of between a half and three-quarters of a percentage point.

Grocery prices still high

Last month, Statistics Canada said while the annual inflation rate slowed to 7.0 per cent in August, grocery prices rose at the fastest rate since 1981, with prices up 10.8 per cent compared with a year ago.

Prices for bakery goods were up 15.4 per cent, while prices for fresh fruit were 13.2 per cent higher than a year ago.

In an effort to combat soaring prices, Loblaw Companies Ltd. said earlier this week it would be freezing prices all of its No Name products until Jan. 31, 2023. It said the price freeze would be on more than 1,500 grocery items of its private label brand, including products include apples, potatoes, butter, eggs, cheese, rice, pasta, toilet paper and paper towels.

Dr. Sylvain Charlebois, director of the Agri-food Analytics Lab at Dalhousie University, said it would be interesting to see if other grocers follow Loblaw’s move — especially once Statistics Canada’s released the inflation data for September.

“It’s going to be interesting to see exactly how Sobeys and Metro will respond to profiteering accusations once again because every month, grocers face a barrage of criticism,” he said.

With files from CityNews senior business editor Mike Eppel