Canadian food inflation slowed in March

OTTAWA – Food inflation continued to slow in March, rising just 1.9 percent from a year earlier.

That's down from February's 2.4 percent annual rate and well below the 11.4 percent peak in food inflation in late 2022 and early 2023.

Continually rising food prices have worried Canadians, as housing costs and interest rates have also risen. Canada's biggest food producers have come under fire from politicians, with the government calling on companies last fall to submit plans to reduce food inflation.

The pressure has led many shoppers to seek discounts at discount grocers or by purchasing private label products instead of brand names. Major grocery chains have responded by opening or repositioning discount stores, notably Loblaw, which opened more than 30 new Maxi and No Frills stores last year.

But while food inflation has declined steadily in recent months, this will not necessarily translate into relief in the short term.

RBC Capital Markets analyst Irene Nattel noted that food prices have risen significantly over the past two years and remain a significant barrier to household budgets.

Because of this, shoppers may continue to engage in “value-seeking activities” such as going to discount stores and choosing private label or sale products, Nattel said in a note.

While food inflation has moderated, restaurant inflation appears to be stronger.

In March, the price of food purchased from restaurants increased by 5.1 percent compared to last year, which is the same as in February and January.

This was led by fast food and fine-dining restaurants, whose prices rose by 6.4 percent in March compared to a year ago.

According to Restaurant Canada, the industry has become more difficult, with two-thirds of restaurants operating at a loss or barely breaking even.

The association said in a February report that last year, bankruptcies in the industry reached their highest annual rate in a decade.

One of the main factors weighing on the sector has been weak sales, Canadian restaurants say, as consumers continue to cut back on discretionary spending amid rising costs.

Statistics Canada found restaurant prices were one of the five biggest contributors to overall inflation in March, along with mortgage interest, rent, gasoline and auto insurance premiums.

The general inflation in March slightly increased compared to February, making 2.9 percent.

Food inflation, which includes food and restaurants, was three percent in March.

This Canadian Press report was first published on April 16, 2024.