Statistics Canada says the annual inflation rate climbed to 5.7 per cent in February, with economists pointing to the war in Ukraine as one of the significant factors pushing the price index to its highest point since August 1991.
Helping to drive the increase in February were higher gasoline prices that were up 32.3 per cent compared with February 2021 and 6.9 per cent from a month earlier.
Statistics Canada says that excluding gasoline prices, the headline inflation rate would have been 4.7 per cent in February.
Grocery store prices were up 7.4 per cent for the largest yearly increase since May 2009, pushed higher by rising fuel costs that are being passed on to consumers.
BMO chief economist Doug Porter said in a note Wednesday that new spikes in rent and dairy prices contributed to February’s consensus-beating inflation figures, the latter tied to a higher gate on dairy farmer payments implemented at the start of the month.
The war in Ukraine remains a source of both significant uncertainty and inflationary pressures.
James Marple, senior economist with TD Bank, said in a note Wednesday morning that even though skyrocketing prices seen at the outset of the conflict have since seen some regression, the “fog of war” has clouded future inflationary forecasts.
“It is difficult to predict with any confidence (inflation’s) path from here, but it will depend in no small part on whether the conflict escalates further or moves toward peaceful resolution,” he said.
Most economists, however, say they’re confident inflation has not yet hit its ceiling, as the ongoing conflict has already put pressure on fuel and food prices through the first half of March.
Tu Nguyen, economist with RSM Canada, said in a note on Wednesday that February’s inflation figures are just a “warm up” for the spring and summer consumer price index (CPI), which will more fully capture the impacts of the Russia-Ukraine war.
“The rippling effects of this price shock could push inflation over the seven per cent mark, the highest since the early 1980s,” she said.
Porter meanwhile predicted headline inflation will “take a run” at six per cent next month.
Though economists had predicted a waning of inflation throughout 2022, the war and other complications could now see surging prices hang around for longer before abating.
“Further out, the war in Ukraine will add to food price inflation, and sanctions on Russia combined with new lockdowns in China will lead to renewed supply chain issues, resulting in a slower easing of goods price inflation later this year than we were expecting a month ago,” wrote Andrew Grantham, senior economist at CIBC Capital Markets.
The Bank of Canada began lifting its benchmark interest rate earlier this month in an attempt to stem rapid inflation, with signals that additional rate hikes could follow throughout the year.
RBC economist Rannella Billy-Ochieng wrote Wednesday that the broadening inflation impacts and tight labour market create a “strong case” for another rate hike at the central bank’s next announcement in April.
— with files from Canadian Press
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