Canadian households are facing continued financial pressure at grocery stores as food inflation increased by four per cent in September compared to the same month the previous year. According to Statistics Canada, annual price hikes at grocery stores have shown a concerning trend of rising costs since a recent low recorded in April 2024. In August, food inflation was reported at 3.5 per cent year-over-year.
The federal government ended 25 per cent counter-tariffs in September, which had previously contributed to elevated costs for food imports, as trade negotiations between Canada and the U.S. are ongoing. Despite this change, CIBC senior economist Andrew Grantham noted that the unexpectedly high food inflation surprised many, particularly given the hope that dropping retaliatory tariffs might ease food price pressures.
Persistent short supplies of beef and coffee are cited as ongoing factors driving higher grocery prices, according to Statistics Canada. Moreover, fresh vegetable prices rose by 1.9 per cent in September after experiencing a decline in August. In addition, sugar and confectionery costs increased significantly, rising by 9.2 per cent compared to 5.8 per cent the month prior.
Grantham emphasized that environmental factors, particularly affecting fresh fruits and vegetables, play a significant role in the pricing of grocery items. He also speculated that a weak Canadian dollar (loonie) has contributed to higher grocery bills. Additionally, annual inflation overall accelerated to 2.4 per cent in September, a notable increase from 1.9 per cent in August.
Irene Nattel, an analyst at RBC Capital Markets, reported that September saw food inflation reach a 21-month high, marking a substantial 27.8 per cent increase over a cumulative five-year basis. Nattel indicated that food prices are likely to remain high for the remainder of the year as grocery retailers seek out local suppliers and alternatives from the U.S., largely due to ongoing tariff tensions and a growing sentiment favoring local products among Canadian consumers.
Earlier this year, major grocery chains swiftly shifted to local suppliers in response to the increasing popularity of the Buy Canadian movement, which gained traction amid the U.S. tariff conflicts. Furthermore, Nattel anticipates that consumers will continue their pursuit of value while navigating the heightened food prices. She predicts an ongoing trend of consumers opting for discount stores, private label products, and sustained promotional strategies to cope with rising costs.
Major grocery retailers such as Loblaw, Empire, and Metro reported that their internal inflation measures generally remained lower than or aligned with Statistics Canada’s fixed basket of inflation metrics during their second-quarter earnings. This observation, according to Nattel, indicates a consumer shift toward discount and private label options as a strategy to mitigate the impact of higher food prices. Similar trends are expected to reflect in the upcoming earnings reports from these grocery chains.
This financial climate highlights the challenges faced by Canadian consumers in managing their grocery expenses amidst fluctuating prices and economic uncertainty.
