Canadians are feeling the pinch of inflation every day.
The cost of living has gone up significantly and the purchasing power of the dollar has been decreasing.
Although we have heard the word inflation for many months, there is not just one particular reason behind rising prices.
Experts feel there are varied reasons for inflation, intertwined and part of a chain reaction.
Reasons for rising prices
Supply Chain and Canadian Import Issues
Due to numerous lockdowns during the pandemic, the supply chain took a hit.
“When lockdowns were over, people around the world, including Canada, went on a shopping spree. Thus, demand went up and supply was not equivalent to the demand. This led to rising prices,” Professor Vik Singh said, he teaches at Toronto Metropolitan University at the department of global management studies.
As well, Singh said several imported consumer goods like automotive parts, semiconductor chips, including the food supply from the United States and Mexico, were delayed due to the supply chain getting hampered. Since Canadians rely on several imported goods, it leads to rising prices. Often, it is noticed that when demand exceeds supply, it in turn leads to higher prices.
Higher Freight Prices
As per Statistics Canada, the price to transport goods containers by rail rose over one-quarter (28.4%) in July 2022 compared to 2021.
The price to transport goods by truck rose by over one-fifth (20.7%) in March 2022, compared to a year earlier for both long haul and local routes. This led to the rising shopping costs of products we buy online and in person. Simultaneously, higher freight prices have also contributed to higher grocery costs.
High Grocery Prices
High grocery prices have impacted everyone in the market, from consumers to business owners.
Dalvir Singh Kathuria knows this burden all too well.
“Earlier we would place an order to manufacturers or suppliers for grocery items at the time of delivery of the current order and they would add our order to their dispatch list. Whereas now, they just take the order and keep it with them. They charge us per the increased cost at the time of dispatching our order,” Singh Kathuria said.
Singh Kathuria is the owner of the first Brampton Cash and Carry and owns grocery stores in several cities in Canada. He said that even though he understands the end consumer is paying more for grocery items, his hands are tied because he will have to charge as per the manufacturer’s costs.
What are the main causes of rising prices?
Energy Costs
According to financial planner, Neeraj Monga, the Ukraine and Russian crisis have led to high energy costs that are impacting the economy in Canada, as well as globally. “Everywhere we go, the consumer is indirectly paying for the energy costs that are incurred on the supplier,” Monga said.
High Rental Costs
Monga pointed out the hike in rental prices in the GTA area.
As the Bank of Canada has been trying to curb inflation by increasing interest rates, this has further led property owners to increase rent. Thereby, putting more pressure on the end consumers, specifically new immigrants and grads. The pay rates have not seen a hike by double digits, though rent increased by double digits.
When will inflation end?
Experts believe it will take months, if not years for the rising prices to come down or stabilize. “Costs are likely to stay stable in the second quarter next year before they begin to start coming down slightly,” Monga said.
Singh advises households to manage their expenditure within their budgets in order to be prepare for any unforeseen circumstances.
However, both agree that no one can predict what the future beholds.
The Bank of Canada may further increase the rate of interest, the purchasing power of the dollar might decrease, and the war between Ukraine and Russia may have a deeper impact. Considering all those factors, Monga and Singh look towards a decrease in inflation only after a cooling period of 2023.
