Canadian households are facing an increase in grocery prices as food inflation rose by four percent in September compared to the same month last year, according to Statistics Canada. This marks a continued trend of rising annual price hikes at grocery stores since a recent low recorded in April 2024. The report highlighted that food inflation was 3.5 percent higher in August from the previous year.
In September, the federal government ended 25 percent counter-tariffs that had contributed to increased costs for food imports. This move occurred amid ongoing trade negotiations between Canada and the United States. CIBC senior economist Andrew Grantham expressed surprise at the high food inflation rates, considering the removal of the retaliatory tariffs should have eased pressure on food prices.
Granthan noted, “We’d actually expected that with the retaliatory tariffs being reduced, that maybe we could get a little bit of an ease in food price inflation.” Persistent short supplies of beef and coffee have also been cited as influencing the rise in prices. Statistics Canada detailed specific increases, stating that fresh vegetable prices rose by 1.9 percent annually in September after experiencing a decline in August. Additionally, sugar and confectionary costs surged to an increase of 9.2 percent, up from 5.8 percent in the previous month.
Environmental factors have been identified as contributing to rising grocery prices, particularly in the categories of fresh fruits and vegetables. Grantham indicated that a weak Canadian dollar may also be affecting grocery bills, leading to further inflation. Overall, annual inflation accelerated to 2.4 percent last month, experiencing a half percentage point increase from 1.9 percent in August.
Food inflation reached a 21-month high in September, up by 27.8 percent on a cumulative basis over five years, according to RBC Capital Markets analyst Irene Nattel. She remarked that food prices are projected to remain high for the remainder of the year, as grocers continue to seek out local suppliers and U.S. alternatives amid ongoing tariff tensions and a strong sentiment toward supporting Canadian products.
Amid the tariff warfare with the U.S., major grocery chains in Canada, including Loblaw, Empire, and Metro, have rapidly shifted towards local suppliers in response to the growing Buy Canadian movement. Nattel indicated that consumers are likely to keep searching for value in their purchases, exploring discount banners and private label products to manage the impact of rising food prices.
“Against this backdrop, we expect ongoing consumer trade-down to discount banners/channels and private label products with sustained promotional/competitive intensity,” she stated. During their second quarter reports, major grocers indicated that their internal inflation measures remained lower than or generally in line with Statistics Canada’s inflation metrics.
Nattel concluded that the adaptations made by grocers to accommodate rising food prices reflected consumer behavior, anticipating a continued trend of discounted and private label products in the near future. She expects similar outcomes from grocers in their upcoming earnings reports, illustrating the ways in which inflation is reshaping consumer buying habits in Canada.
