Low loonie drives up grocery bills 4.1% as food prices ‘accelerate’

Click to play video: 'Food prices continue to soar'
Food prices continue to soar
WATCH: The cost of going grocery shopping is only going up. So what's behind the increase? Mike Armstrong went shopping for answers – Jan 20, 2016

While Canadians aren’t saving much at the pumps, we’re definitely paying more for food thanks to a cratering currency, something that’s helping create the worst price environment at supermarkets in 30 years, according to at least one expert.

The inflation rate came in at a relatively tame 1.6 per cent in December, Statistics Canada said Friday, but accelerating from a month earlier as food costs climbed higher amid the loonie’s sharp slide below 70 cents U.S.

Prices for food purchased from stores were up 4.1 per cent compared to the same month a year ago — well over twice the headline inflation rate — marking a jump up from the 3.7 per cent climb in November.

“The acceleration was mainly attributable to the fresh vegetables and fresh fruit,” Statscan said.

“There’s been some spectacular hikes,” said Sylvain Charlebois, a food industry expert and professor a Guelph University’s Food Institute.

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Lettuce has climbed by an average of 8 per cent while tomatoes for example experienced a month-to-month jump of 7 per cent, Charlebois said. Other vegetables — like cauliflower — are seeing even bigger jumps.

Surging produce is adding to already relatively high prices for meat, particularly red meat, which experienced simliarly rapid price growth last year and in 2014 amid a widespread supply shortage.


Interestingly, prices for women’s clothing were down last month compared to December 2014, slowing the advance of clothing and footwear costs for consumers generally.

Clothing and footwear are two areas that, like food, are heavily imported and are subject to quick price inflation when the currency drops.

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MORE: Warm weather sees boots, tuques and jackets pile up at stores

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El-Nino too

Experts suggest any deals likely won’t last though given the loonie’s continued drop. Food prices are almost certain to continue to rise sharply, BMO economist Sal Guatieri said.

“They are likely to rise much faster in coming months, led by fresh fruits and veggies,” Guatieri said.

In addition to the adverse impact of the lower Canadian dollar, flooding caused by El-Nino has contributed to supply shortages and price increases on produce from California and Mexico, said Claude Tessier, president of Sobeys supermarket locations in Quebec.

MORE: Sobeys says low loonie, El-Nino will keep grocery prices high

The country’s second-largest grocery store operator, which also owns banners such as IGA, Safeway and FreshCo, is struggling to deal with the worst situation in 30 years by trying to import fresh food from other growing areas such as Florida, Morocco and Spain, Tessier said this week.

“Importers are shopping around other regions outside California to procure vegetables. And they have to pay more,” Guelph’s Charlebois said.

More produce may be being sourced from Europe, he suggested. “Shipping is two times the price compared to California.”

WATCH: The rising price of vegetables is proving to be quite difficult to swallow for British Columbians. Ted Chernecki looks at whether the cost will continue to soar.
Click to play video: 'British Columbians cope with soaring vegetable prices'
British Columbians cope with soaring vegetable prices

So-called “core” inflation, which strips out items with more fluid price movements, like food and gas, to focus on items with more stable pricing such as furniture, is feeling the impact of the low loonie as well, experts say, a trend that’s sure to persist and intensify.

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“The direct pass-through effects from the falling Canadian dollar is the main driver of core inflation right now,” said David Madani, economist at Capital Economics in Toronto, said.

MORE: Latest coverage — the plunging loonie

WATCH: A loonie at 59 cents US? At least one experts sees the dollar falling there.
Click to play video: 'New prediction says loonie could sink to 59 cents U.S.'
New prediction says loonie could sink to 59 cents U.S.

— With files from The Canadian Press 

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