Canadians face jacked up food, gas prices as Americans rake in savings

Average pump prices are actually higher now compared to last January, when oil prices were just shy of $50, BMO says. File / Getty Images

Believe it or not gas prices in Canada have been falling faster than the price of food has been rising over the past year.

As of November, pump prices were down 11 per cent on average compared to the same month a year ago, notes BMO Capital Markets economist Sal Guatieri. The drop compares to a 3.4 per cent climb in food prices sold in stores (though, produce and meat were up by much more individually).

Still, Canadians spend about four times as much on food as we do on gas, meaning the gas discount has been quickly erased by the jump in grocery bills.

“What we were saving at the gas pump we lose at the grocery store,” the BMO economist said.

So far, supermarkets that have been hit by higher costs on imported food have been able to pass them onto customers with relative ease, though some, like the Safeway chain, are facing pressure from regions most acutely hit by the oil and commodity slowdown.

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Wider disparity

But it gets a little worse if you’re a Canadian consumer looking south.

The example above was the late fall. Since then, gas declines have leveled off, with pump prices actually higher now compared to January 2015 (when oil prices were closer to $50 – figure that one out).

MORE: Here’s how your chequebook will fare in 2016

Meanwhile, food inflation has likely “accelerated” Guatieri says, given the continued drop in the loonie, which drives up prices of imported food.

By contrast, while our spending power is being eroded, our U.S. neighbours have seen a roughly 0.8 per cent increase in spending power because of gas prices that continue to fall, according to Guatieri. And they’re even gaining a better deal on groceries because of a strengthening U.S. dollar.

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Welcome to the new normal (or maybe that’s the old normal).

Here’s how food inflation in Canada has performed against overall inflation since the loonie began its descent.

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