Surely the government will take responsibility for rising inflation, just as they sought credit when the inflation rate declined, right?
Last month, Chrystia Freeland went on a victory lap touting Canada’s inflation rate at the time of 2.8%:
“Mr Poilievre, we are focused on making life more affordable for Canadians: by bringing inflation down – now at 2.8 % – and by supporting the Canadians who need it most.”
Mr Poilievre, we are focused on making life more affordable for Canadians: by bringing inflation down – now at 2.8 % – and by supporting the Canadians who need it most.
— Chrystia Freeland (@cafreeland) July 29, 2023
Freeland shared a similar celebratory message while speaking at an event:
https://twitter.com/MelissaLantsman/status/1691443650121641984
Yet, something tells me Chrystia Freeland won’t be going on a victory lap this month.
Inflation rises to 3.3%, ahead of expectations
According to Statistics Canada, the consumer price index rose 3.3% on a year-over-year basis in July.
This is a notable increase from the 2.8% increase in prices in June.
A key reason for the increase was the base-year-effect, as a significant decline in gas prices in July of 2022 has now dropped off.
Food prices continue to rise at a rapid pace, as food inflation ‘slowed’ to 8.5%, largely due to fresh fruit prices increasing by 4.1% in July compared to 10.4% in June.
Inflation rose in all provinces except Saskatchewan and B.C.
Economists had expected a lower increase in inflation this month, with a consensus of 3.0% according to BNNBloomberg:
“The consumer price index rose 3.3 per cent from a year ago, the first reacceleration since April, Statistics Canada reported Tuesday in Ottawa. That was faster than the median estimate of 3 per cent in a Bloomberg survey of economists. On a monthly basis, the index rose 0.6 per cent, double their expectations.”
Lower inflation doesn’t mean lower prices
When inflation declined to 2.8 in June, many presented this as a ‘decrease’ in prices.
However, that is not at all true. For prices to actually decrease, there would have to be deflation, not just lower inflation.
When government officials and some in the media talk about lower prices, they actually mean prices are rising at a less rapid rate. But, since those prices are the accumulation of all past inflation, even a decline in the rate of price increases can mean a significant negative impact on our standard-of-living.
That’s why it was odd to see Freeland go on a victory lap last month, because the decline in inflation was largely built around the fact that June of 2022 was the peak of inflation, so the year-over-year comparison was bound to return a lower number. With that base-year-effect no longer as strong in terms of the overall inflation number, the inflation rate has risen.
Ongoing inflationary policies
The fundamental problem facing Canada is government policy based on inflationary spending, higher taxes and excessive intervention.
The Liberal government continues to take more money out of our pockets with the carbon tax, a policy that also drives up costs and disincentivizes productive investment. Meanwhile, they have run large deficits and spent immense sums of money on things like subsidizing electric battery plants to the tune of tens of billions of dollars.
At the same time, the government is rapidly increasing Canada’s population at a pace far exceeding housing construction, further distorting the housing market and driving up shelter costs even further.
In response, the Bank of Canada has had no choice but to increase interest rates. The BoC knows this will hurt the many Canadians carrying a high debt burden, but the alternative – out-of-control inflation – is even worse.
The Liberal government has put Canada in this situation through the deliberate embrace of inflationary policies, and they show no sign of reversing those policies. However, the Liberals continue to evade responsibility for the consequences of their policy choices.
If the logic of the government was consistent, they would take responsibility for July’s inflation surge, just as they claimed credit for June’s inflation decline. But if we’re waiting to see some logical coherence from the Liberal government, we’ll be waiting a long time.
Spencer Fernando
Photo – Twitter
