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If there’s one thing an incumbent candidate seeking re-election does not need, it is unwelcome news from the economic front.
But with less than a week to go before Canadians cast their votes in a tight federal election race pitting Prime Minister Justin Trudeau’s Liberal Party against the Conservatives headed by Erin O’Toole, the latest readings on Canada’s inflation provided fresh fodder for the opposition to seize upon.
Consumer prices in August rose 4.1 percent over the same period last year, Statistics Canada said on Wednesday.
That pace of prices increases, which is well above the Bank of Canada’s target rate of 2 percent, was stronger than many analysts were expecting and marked the highest annual inflation rate since March 2003.
“The numbers released today make it clear that under Justin Trudeau, Canadians are experiencing an affordability crisis,” O’Toole tweeted. “It’s troubling that Justin Trudeau seems to not care about the skyrocketing cost of living that is being imposed on Canadians through inflation.”
The numbers released today make it clear that under Justin Trudeau, Canadians are experiencing an affordability crisis. It’s troubling that Justin Trudeau seems to not care about the skyrocketing cost of living that is being imposed on Canadians through inflation. https://t.co/A4LDkeScZ6
— Erin O'Toole (@erinotoole) September 15, 2021
Inflation hits less well-off households the hardest because it eats up a larger share of their income, especially when prices spike for essential goods and services that can’t be purchased at a later date – like food, fuel and shelter.
Inflation last month was largely driven by petrol and home prices. Gasoline prices rose nearly 32.5 percent, while the home replacement cost index, which reflects rising prices for new homes, increased 14.3 percent in August over the past twelve months.
Housing affordability has become a hot-button issue in this election, with rising prices placing homeownership further out of reach for first-time buyers, or forcing them to take out bigger mortgages.
Price pressures have been building across the world as businesses gear up operations en masse, triggering bottlenecks for raw materials and higher shipping costs.
Statistics Canada noted in its press release that the jump in inflation last month “mainly stems from an accumulation of recent price pressures and from lower price levels in 2020”.
That’s what economists call “base effects”, which compare current prices to last year when prices of goods and services were gutted by lockdowns and other COVID-19 restrictions that sapped business activity.
Like monetary policymakers in the neighouring United States, the Bank of Canada believes that the current inflation wave is likely to prove temporary
Last week, Canada’s central bank chief Tiff Macklem said: “We continue to expect that these factors pushing up inflation will be transitory.”
But those price pressures won’t abate before Canadians cast their votes in five days’ time.