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MNI REALITY CHECK: Canada CPI May Rise Past Most in Decade


Supply disruptions and surging material costs may boost prices, industry sources say.

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Canadian industry sources told MNI they expect inflation pressures to continue in coming months on strong demand, higher raw material costs and supply disruptions.

Consumer price inflation will likely come in at 3.3% for April according to an economist consensus, the highest in a decade, passing the Bank of Canada's target range of 1% to 3%. Most of the gain comes on gasoline and overall price weakness last year as the pandemic struck. BOC Governor Tiff Macklem said last week he remains confident price gains will top out around 3% and later fade away.

The inflation rate already doubled to 2.2% from 1.1% in the March report and the next few months are clouded by a mix of third-wave lockdowns and progress rolling out vaccinations. Canada's surging dollar is also providing some offset to inflation pressure.

Joe Vaccaro, CEO of Ontario Home Builders' Association:

Demand for housing is so strong that construction companies are raising wages to hire people away from other industries like retail, he said.

"The cost of all commodities and labor is up-- lumber is up almost four times from a year ago, and on the housing side, you are also competing with renovations," he said.

Prices are up whether it new housing or resales, Vaccaro said. Demand is surging and supply very low with people leaving big cities and looking for bigger properties to wait out the pandemic.

"The federal government told us they have a program to bring 1.3 million new immigrants to Canada in three years and the natural population growth tells us that 200,000 people per year are joining southwest Ontario a year, so that means the demand is real," Vaccaro said. "We are going to be in this demand cycle for at least another year."

"I don't see a lot of 65-year-old retirees looking to change their family home to a condominium, I see them looking at staying in their home," he said.

Maintaining construction timelines is more difficult, he said. On large condominium projects, if they get shut down for 14 days, it puts you behind by a month because you have to cancel your material deliveries, he said.

Candice Appleby, Executive Director, Small Scale Food Processor Association:

"Retail stores are raising their prices that they were charging their consumers but their suppliers cannot raise their prices, even when suppliers hit by an increase in prices," she said.

"Vulnerability within our systems have been clearly uncovered because of the Covid pandemic, infrastructure bottlenecks and transportation and supply chain disruption," she said.

Many smaller firms are working to rebuild a client base shaken up by the pandemic, and many of them relied on commercial foodservices that have been hard hit by hotel, restaurant and catering shutdowns.

Kris Nichols, Director of Research and Extension, Canadian Organic Growers:

"The organic industry is trying to be able to grow and keep the cost to the consumer down as much as possible, and they are trying to find a way to expand their markets, so increasing costs to the consumer is not necessarily helping them to achieve this goal" she said.

"The pandemic forced farmers to enhance their supply chain efficiency, like aggregating products for sale and aggregating inputs with other organic producers," Nichols said.

"Having looked at the costs and improved efficiency during the pandemic, it has changed the industry as a whole for good and that's why both short term and long term future of this industry is bright."