Currently, the BC Inflation Rate has hit a 31-year high. In the past year, food prices have increased 9.7 per cent, which is the highest increase since September 1981. In the future, the BC Inflation Rate is expected to rise a further 0.1%. Inflation is a key indicator of the economy’s health. If it continues to rise, it can put a damper on the Canadian economy.
The Consumer Price Index (CPI) is a monthly release that includes Canada and the regions of Yellowknife and Whitehorse. This report includes the inflation rates for each region and the factors that drive them. While these numbers may be a little more pronounced in some regions, they are still indicative of overall trends in the economy. Let’s examine the factors that drive the BC inflation rate.
The Consumer Price Index, the official measure of inflation in Canada, rose 2.4 per cent in January. That was a full percentage point higher than the national average. Meanwhile, inflation in Quebec, Ontario, and Alberta rose only by a fraction of a percentage point. While Canada’s inflation rate increased by only 0.7 per cent in January, it was offset by a 16 per cent decline in airfare prices.
The CPI increased in all major components during January 2022. The largest share of the increase was in the cost of shelter. Overall, services rose 3.4% year-over-year, matching the increase in December 2021. While the increase was below the average for other categories, the CPI increase was higher for goods than for services. This month’s CPI increase was the highest since February 1991. If we’re looking at the monthly CPI, it shows that the costs of shelter and transportation were up by 8.1% and 7.7% respectively. Compared to the same months in May, the overall BC inflation rate increased by 5.6%, or 2.4% year-over-year.
The BC CPI is a broad-based measure of inflation that includes more than 100 items. The BLS produces a chain-weighted CPI, which eliminates the effects of substitution bias. It changes expenditure weights monthly, compared to the nonchained CPI, which only adjusts weights biannually. This makes it easier to see how inflation affects the economy. The broader economy has been contracting for the past two quarters, and big retailers report earnings this week.
6.2% core inflation
Consumers are feeling the pinch of a rising price. BC recorded the highest rate of core inflation since August 1991 and was the second fastest in the country in January. The rate is well above the one-to-three-percent target range set by the Bank of Canada. Meanwhile, prices in other provinces rose modestly. The Bank of Canada closely monitors three measures of core inflation, which climbed to 3.2% in January.
Inflation in Saskatchewan and Alberta is lower than in British Columbia and is also due to base-year effects, as well as pent-up demand. However, provincial CPI figures conceal large regional differences, with Quebec and Alberta recording higher than average inflation rates. This regional variation is not uncommon in Canada, but it tends to become more pronounced during significant oil price swings and business cycle turning points. As a result, provinces should remain cautious in interpreting these figures.
In BC, the monetary policy committee has forecast 6.2% core inflation for the year ending in 2022. However, the Bank of Canada is still unsure of what rate hikes will be announced. Analysts at FocusEconomics believe that interest rates will remain at 0.75% in 2022. As a result, they expect BC inflation to fall to between six and seven per cent in the third quarter. This is the highest rate since the onset of the global financial crisis.
Core inflation in BC is an important indicator for consumers. The core CPI measures prices excluding volatile elements. The increase in BC’s core CPI is the highest in nearly 30 years. The increase in the CPI was mainly due to a 9.9% month-over-month increase in fuel. Fuel inflation in BC is 30.7% higher than it was a year ago. It has been a tough year for British Columbia consumers and is likely to continue to be so for the rest of the year.
In September, food and gasoline costs drove the cost of living up sharply. The annual rate of price increases accelerated to the fastest pace in two decades. Core inflation in BC was 6.2% in September, which was higher than the one-year average. However, the Bank of Canada has also warned that the rate of inflation could remain around four per cent until the end of the year. However, the Bank of Canada is not raising rates at this time. Inflation expectations have been on the rise, and the bank may have no choice but to hike rates again.
A recent report shows that inflation in British Columbia hit a new 31-year high in March. That’s the highest inflation rate in the province since January 1991, when the GST was introduced. The increase in March was due to an uptick in the cost of gasoline, which spiked by 38.8 percent, compared to an increase of 11.8 per cent in February. Although the inflation rate was higher than expected, the Bank of Canada is trying to cool rising prices.
Despite the increased cost of housing in British Columbia, prices remained at a 31-year high in January 2022. The rise was primarily due to higher rent prices, which were a result of increased demand in the region. Inflation is being understated by the Bank of Canada, whose recent changes to the CPI methodology will lead to chronic understatement of inflation. This is not a good sign for Canadians, who are looking to trim their household budgets to keep up with rising costs.
The Bank of Canada has already raised its benchmark interest rate to one per cent. Inflation is expected to remain above that target rate until 2023. Higher interest rates will crimp the purchasing power of consumers, and therefore, the Bank of Canada may have to raise the benchmark rate even further. So, what should be the next step? The Bank of Canada may increase its benchmark interest rate to three per cent. But that’s not the only move the government has made lately.
0.1% from July 2022 to July 2022
Inflation rates in British Columbia increased by 0.1 percent in July, following an increase of 0.7 percent in June. This increase was mostly due to lower gasoline prices, but underlying price pressures will likely lead the Bank of Canada to continue aggressive rate hikes. The consumer price index rose 7.6% from July 2016 to July 2017, as well as by 0.1% from a month earlier. This increase matched expectations.
The Consumer Price Index for July of 2022 was 153.1, which was slightly above the prior year. The inflation rate for the year is 7.6%. While the Bank of Canada is predicting that inflation will remain high through July 2022, it could pause its aggressive hike cycle if the rate rises too much. At this time, the Bank of Canada will need to assess the impacts of a higher inflation rate on economic growth.
The July 2022 reading for the Inflation rate in British Columbia was 0.4 percent lower than the same month in June. The increase in prices for new and used motor vehicles and alcoholic beverages were offset by decreases in the costs of apparel and recreation. The annual change for this index was 6.3 percent, with the largest contributions coming from the transportation sector and household furnishings and operations. Despite this lowered rate, prices are still higher than the prior year.
Compared with the national rate, BC inflation has been significantly lower than the national average. The national rate of inflation is the highest since January 1983. The provincial inflation rate is 7.9 per cent. In July 2022, however, the rate of inflation in British Columbia was lower than the national average. Meanwhile, inflation in Canada was 7.6 per cent. But in July, the inflation rate on the West Coast is slightly higher than in the national average.
The Consumer Price Index (CPI) for non-durable goods increased in July. Non-durable goods prices, such as groceries and natural gas, also increased. The rate of inflation for in-person services increased over the same period, but it was smaller than in June. Consumer prices are still higher than wages, but inflation has slowed down since the start of the year.
Among many other things, David A. Grantham is a contributing author to UmassExtension West Vancouver Blo. He is a renowned expert on real estate in BC.
Born in North Vancouver, Louisiana, Dr. Grantham grew up in Lower Lonsdale. He then went on to complete his business degree at the University British Columbia. As of this writing, Grantham has completed over 100 projects, including the development of a high rise building in Vancouver.
He is a husband, father, son, brother, and friend. He was a dedicated outdoorsman and enjoyed sports such as hunting, fishing, scuba diving, and snow skiing. His wife, Alison Grantham, and their two daughters survived him. He is survived by his wife Alison Martin Grantham and two daughters.