Statistics Canada reports that Canada’s inflation rose last month to 4 per cent, majorly driven by pump prices that increased by 4.6 per cent in August. Energy prices have had a substantial impact on inflation as a change here has a ripple effect in almost all other sectors.
Analysts are warning that inflation is likely to remain high as oil prices head back towards $100 a barrel. There are also expectations that the coming winter in North America will drive up diesel prices. Experts say that the only possibility of prices falling is when demand falls due to a deep recession.
However, it is not just energy prices that are up. Shelter costs are up by 6 per cent in the year ending in August, having increased by 0.9 per cent from the previous month. Rent in particular rose by the biggest margin for the sector, increasing by 6.5 per cent. Mortgage costs rose by 2.7 per cent in August, leading to an annual increase of 30.9 per cent. The rise in grocery prices has slowed down with an annual increase of just 6.9 per cent, far less than recent highs recorded of over 11 per cent.
The rise in inflation is also fuelling fears that the central bank will raise interest rates further. Analysts had estimated that inflation would reach 3.8 per cent, and with a 4 per cent result, remains at double the central bank’s target of 2 per cent. Money markets are giving a 42 per cent chance of an interest rate hike by the central bank following the report from Statistics Canada. The next rate decision is to be announced on October 25.
When it comes to household debt, Statistics Canada reports that there has been a slight improvement in the second quarter. The numbers show that for every dollar of household disposable income, there was 1.81 dollars in credit market debt. This is a slight fall from 1.84 dollar credit market debt in the first quarter.
As the increased cost of living eats into Canadians’ savings and makes it harder to achieve financial security, financial uncertainty has become the new norm. A survey conducted by the Royal Bank of Canada (RBC) found that 77 per cent of Canadians were not able to save as much as they wanted, while about half of respondents confirmed being the most worried they have ever been about money. A potential recession was also a key concern as many feel it would be harder to get through now than during the economic downturn of 2008.
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