A majority of Canadians feel the country is already in a recession, because most people are getting poorer month after month.
The latest inflation data from Statistics Canada shows prices rose 6.3% in December, following a 6.8% increase in November.
The decline in the rate of inflation was largely due to declining gas prices:
“Consumers paid 13.1% less at the pump in December compared with November, the largest monthly decline since April 2020. This reflected lower prices for crude oil amid concerns of a slowing global economy, as well as reduced demand following an increase in COVID-19 cases in China. On a yearly basis, prices for gasoline rose 3.0% in December after a 13.7% increase in November.
Lower crude oil prices were also reflected in a 14.8% month-over-month decline in prices for fuel oil and other fuels. On a year-over-year basis, this led to a smaller increase in December (+51.2%) than in November (+73.4%).”
Food prices remain elevated
In December, the Liberals & NDP voted against a Conservative motion that would have removed the carbon tax from the food supply chain:
Many Canadians are likely incensed at that move, since food prices continue to remain elevated.
Grocery prices rose by 11% year-over-year in December of 2022, compared to an 11.4% increase in November of 2022.
Aside from food, mortgage interest costs are also high:
“The mortgage interest cost index continued to put upward pressure on the CPI amid the ongoing higher interest rate environment, rising 18.0% on a year-over-year basis in December following a 14.5% increase in November.”
Demand destruction vs production
There are two main ways for inflation to be addressed.
The first is to increase production of in-demand goods. As an economy becomes more productive, more can be produced in a more efficient manner. If the supply of goods increases at a higher rate proportional to the increase in the money supply, prices can go down, or at least rise at a slower pace than wage growth.
That’s the good way to keep inflation manageable.
The other way is through what is called ‘demand destruction.’
A combination of rising interest rates and prices rising at a higher rate than wage growth inevitably means that people can’t afford as much.
Sooner or later, that reduced demand leads to lower prices/a slower pace of price increases. This is typically what happens during recessions.
At the present moment, inflation continues to outpace wage growth.
Canadian average hourly wages rose 5.1% in December of 2022, trailing the 6.3% inflation rate.
Thus, Canadians continue to fall behind.
This gap between wages and price increases has been ongoing for quite some time, meaning that Canadians are not only falling behind but are falling behind more and more every month.
So, even though Canada may not be ‘technically’ in a recession, it makes perfect sense that a majority of Canadians feel we are already in one, because their actual buying power has been substantially reduced.
And with a federal government in place that continues to raise taxes, push up the price of energy, and strangle the massive potential growth of the energy sector, there’s no indication that Canadians will get a break anytime soon.
Spencer Fernando
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