Yes, the big number of inflation that draws all attention It is low in July than in June. The annual consumer price index that groups all goods and services rose 7.6%, a slower pace than the alarming 8.1% we saw in June and the first slowdown in more than a year.
It is almost entirely due to gasoline. After posting a 55 percent year-over-year increase in June, gasoline prices were only up 36 percent in July compared to a year earlier. In the month, gasoline was actually nine percent cheaper.
That is important because the gas plays with our heads. We see those prices posted every day, marvel at how high or low they are, and a decline feeds our psyche about the economy at large.
But also breakfast.
The high cost of wheat, fueled by the Russian invasion of Ukraine, meant that baked goods rose 13.6 per cent in July, marking an even larger increase from the previous month. Eggs (15.8% more), fruits (11.7% more) and coffee and tea (13.8% more) also increased in speed. Cereal has been out of control for months, not to mention milk.
And actually, the big brains at Capital Economics took all 55 components of the consumer price index in July and found that 18 of them were actually accelerating, despite a gas-driven slowdown in the headline number. That is the most since the early 1990s.
It boils down to this: Inflation, driven higher in recent months by oil, gas, commodity price swings and supply chain disruptions, has spread to all kinds of goods and services. services. And even if underlying commodity prices appear to be settling for now, that broader metastasis is still working its way through the economy.
“Inflation may be past the peak, but it’s still pretty painful,” says BMO chief economist Doug Porter.
At this point, it’s too early to declare victory over inflation, especially since deeply bitter politics, in Canada, the United States, and Europe, are sinister. And the pandemic has taught us to expect the unexpected when it comes to turbulence.
In Europe, a winter of fuel shortages linked to ongoing Russian aggression is looming, and the effect on energy prices in general is difficult to predict. Energy security is an essential ingredient for price stability, although recent Canadian data shows us that it is not enough.
In the United States, President Joe Biden prepares for the November midterm elections with relentless messages about inflation that will keep prices high in mind for the next few months. On Tuesday he signed into law the Inflation Reduction Act, which targets corporate profits, prescriptions and energy prices, and Canada will import that talk even if our numbers here are generally lower.
That psyche thing again.
In Canada, the Conservatives will have a new leader in less than a month. They have already stated that family finances are their top priority. Even if inflation isn’t accelerating, they will no doubt take to the dossier with new enthusiasm, insisting that high prices aren’t coming down, squeezing the middle class and exacerbating affordability issues that were already central to Canadian politics. long before the pandemic gave birth to nasty inflation.
The Liberals are already preparing to fight on that front, polishing their election promises on housing and refining their lines on inflation, cost control and labor shortages in an attempt to avoid criticism.
Without a doubt, the fall will bring us many accusations, slogans and accusations about who is to blame. We can count on that pattern to persist, even as the world economy churns wildly, the Russians advance in Ukraine, and Biden fights for his political future.
But let’s hope the idea of an unaffordable breakfast will center the mind.
Despite the moderation in July figures released on Tuesday, inflation is expected to remain too high for another year. Policies to control it involve havoc with housing markets, wages that don’t even come close to keeping up with the rising cost of living, and possibly a recession. The Bank of Canada does not expect inflation to return to the two percent target until 2024.
That’s a lot of effort to make ends meet, even more so for low-income people than others, something that politicians and decision-makers have the ability to mitigate.
Something to think about over coffee.
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