Inflation refers to a decline in the purchasing power of currency, and results in a general and sustained increase in prices. Loss in currency value has an impact on the entire national economy. A common measure of the rate of inflation, the Consumer Price Index (CPI) is an indicator of the change in consumer prices paid by Canadians. It is calculated by comparing the cost of a fixed basket of goods and services purchased by consumers over time. For example, if in one year that basket costs 100 Canadian dollars, and the next year the same basket costs 102 dollars, then the average annual inflation rate is two percent. By 2021, inflation had reached 3.4 percent in Canada.
Causes and drivers
By June 2022, the monthly inflation rate had reached 8.1 percent. The COVID-19 pandemic, during which demand for certain services declined, as well as the disruption of the supply chain, and labor shortages have indeed led to an increase in the prices of various goods and services, such as food, gasoline, motor vehicles, and furniture. In addition, the conflict between Russia and Ukraine has caused oil and gas prices to rise, and as cereal exports in both countries are expected to decline, the cost of some processed foods has also increased. However, rising inflation is not a recent phenomenon, and some factors were already contributing to it before the pandemic began. The financial crisis of 2008 and the trade wars between the United States and China, which resulted in the imposition of tariffs on Chinese products, led to higher prices for North American consumers.
In fact, most Canadians had to take action to cope with inflation. Many began to cut back on food waste, to buy less expensive items at the grocery store, to spend less money on household items, entertainment or vacations, or to reduce their vehicle use. Nearly one-third of individuals said they had driven less in recent months, to cut back on spending, particularly in the Atlantic provinces and Saskatchewan.
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Research Expert covering consumer goods and retail