The neophyte “journalists” of the Canadian mainstream media (CBC, Global, Bell), with their liberal arts degrees in who knows what, have been chortling this week that the inflation dragon has been slayed (on behalf of their paymasters in Ottawa). But not so fast.
With just a little bit of critical thinking and a deep desire to balance their cheque books, Joe & Mary Sixpack know “HAPPY DAYS ARE NOT HERE AGAIN”.
The key thing to remember when it comes to inflation news is that a “year over year” number is what is reported. This number, good or bad, is driven by the size of the denominator (last years number in the same month) within the calculation. A great example is the crazy high gasoline prices in June 2022 driven primarily by the Russia-Ukraine situation at the time. Now, it looks like we are out of the woods with gasoline prices coming back down to earth. But are they? Sure, gasoline is down 21.6% vs last year but, gasoline is still roughly 30% higher than it was in June 2021!
Stay dumb and innocent, or get informed. What one decides will ultimately determine their future financial survival.
A Canadian Chamber of Commerce press release from July 18, 2023 (click here) does a nice job of breaking down exactly why Joe & Mary Sixpack are feeling the way they are feeling. Additionally, these guys at the Chamber are not on any election ballots so you can rely on the fact that their interests are strictly in operating within reality and truth rather than “the spin”, in order to maintain their future employability , unlike many of our elected officials.
KEY TAKEWAYS
Exceeding market expectations, Canada’s headline CPI inflation slowed in June to 2.8% on a year-over-year basis, below the anticipated 3.0%. The deceleration is primarily driven by base effects from a year ago, particularly in energy prices following the geopolitical situation between Russia and Ukraine. When excluding food and energy, prices rose by 3.5% compared to 4.0% in May.
Despite a slowdown in energy price growth, gasoline continue to drive down inflation with a 21.6% decline in June (following a drop of 18.3% in May). This reflects the base-year effects when global crude oil demand surged as China eased pandemic-related restrictions
Grocery prices are still running hot (+9.1% yr/yr in June as compared to +9.0% May). Meat (+6.9%), baked goods (+12.9%), and dairy products (+7.4%) accounted for most of the rise.
Bottom line for now is that whatever you feel you are saving in gasoline to drive your car to get to the grocery store, you are more than spending at the grocery store if you have any intentions of eating!
Bon Appetit!