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Food inflation continues to slow, but still outpacing general CPI increases

Lower prices for fruits and vegetables led to a deceleration in grocery prices

Food inflation continued to outpace headline inflation in March, but experts say another year-over-year dip is an encouraging sign as consumers hope for relief at the grocery store.

The price of groceries rose 9.7% last month compared with the same period last year, down from the 10.6% year-over-year increase recorded in February, according to Statistics Canada's latest consumer price index.

The slowdown was driven by the cost of fruits, which increased 7.1% year-over-year in March after a 10.5% gain in February, and vegetables, which slowed from a 13.4% bump to 10.8%.

"I think there's some real reasons for optimism that over the course of the summer, we might see some continued relief,'' said economist Mike von Massow of the University of Guelph's Ontario Agricultural College.

READ: Bank of Canada holds key interest rate at 4.5%, bumps up growth forecast for 2023

Von Massow said shoppers should expect "incremental'' price drops "reasonably soon,'' noting prices also declined for poultry, ham and bacon in March.

While food inflation has been decreasing so far this year, experts want to remind consumers that doesn't mean overall prices are coming down, but rather rising less quickly.

The food inflation rate for March of 8.9% was more than double the general inflation rate, which was 4.3%, down from 5.2% in February.

Food purchased at restaurants rose 7.2% from the previous year, down from 7.7% in February.

Simon Somogyi, the Arrell Chair in the Business of Food at the University of Guelph, pointed out that the costs of bakery goods and dairy products increased in March despite price relief for other products.

Somogyi said it was common prior to the pandemic for food inflation to hover around two percentage points higher than the general inflation rate, but said food prices have been more sensitive to other shifts in recent months.

"We're seeing many impacts of the Ukrainian conflict... particularly impacting grain prices, and we're seeing the impact of the Canadian dollar being a bit lower and fuel prices being a little bit higher,'' he said.

"The prices of food in Canada, the picture of that is starting to improve from what we've seen over the last 18 months. It will take some time for the impact of those prices to be felt in the grocery store.''

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