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Canadian inflation rate at highest level since 2003

But… BDC Economist Pierre Cleroux feels the Bank of Canada will be conservative (courtesy of BDC report delivered at Xcelerate Summit on Tuesday

(For those of you who have tickets but missed this session – recordings are in the Pop Up Channel on the Xcelerate platform.)

Canada’s inflation rate rose to a new 18-year high of 4.4 per cent in September, with higher prices for transportation, shelter and food contributing the most to the jump in the cost of living.

September’s reading from Statistics Canada marked the sixth consecutive month that headline inflation has clocked in above the Bank of Canada’s target range of between one and three per cent, with August’s report showing a 4.1 per cent increase.

Food prices are up by 3.9 per cent. Prices for just about every type of food went up sharply, especially meat, which rose at an annual pace of 9.5 per cent. That’s the fastest pace of increase in meat prices since 2015, with pork up nine per cent, chicken 10 per cent and beef 13 per cent.

The data agency calculates that prices for new cars rose by 7.2 per cent in the past year.  

“The global semiconductor chip shortage, leading to limited supply, contributed to higher prices in September,” Statistics Canada said.

The pace of overall price increases has reflected the rebound in prices from the lows witnessed one year earlier, while a surge in consumer demand as conditions get closer to pre-pandemic scenarios has been confronted with the reality of COVID-19 disruptions providing significant challenges to supply chains that often involve multiple countries. The effects have played out at production facilities, on shipping routes and with commercial truckers on the road.

When things slowed down in 2020, car companies slashed their orders from their suppliers for the components that go into them. When demand came roaring back, those same suppliers could not ramp up fast enough, writes CBC’S Pete Evans, especially the makers of the cheap little semiconductor microchips that are in just about everything these days.

“Do you remember the toilet paper shortage in March and April of 2020?” automotive journalist Stephanie Wallcraft said in an interview. “That’s pretty much what we’re going through right now in terms of semiconductors.”

It’s led to idle shifts at Canadian auto plants, and layoffs at a Windsor, Ont., production site. The situation is exacerbated by the fact that the vehicles Canadian plants are set up to make aren’t always the ones that sell the most.

“What they’re doing is they’re allocating the minimum chips to their most profitable vehicles,” Unifor president Jerry Dias told CBC News.

In the U.S., Transportation Secretary Pete Buttigieg said in a broadcast interview on Wednesday that “there are going to be disruptions and shocks to the system as long as the pandemic continues.” Buttigieg’s comments come a day after a Moody’s economist said in a report that there is “no sign” of “supply-chain headaches” ending very soon.

Patricia Dent
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