Canadians face high inflation, higher interest rates in a ‘perfect storm’

Food and agriculture affected

calendar icon October 30, 2022

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3 minutes to read

In a warehouse on an industrial sprawl in Ottawa, giant metal boxes of donated groceries pile up as volunteers sort canned goods, pasta and other foods for distribution to pantries across the Canadian city.

Demand is up 33% at an Ottawa food bank from pre-COVID-19 pandemic levels, with more visits as grocery, gas and rental prices soar, along with rising borrowing costs, leaving more Canadians struggling to make ends meet.

“We’re seeing definitely more people,” said Rachel Wilson, chief executive of the Ottawa Food Bank, adding that the organization now spends C$6 million ($4.4 million) a year on food, up from C$2 million before the pandemic.

“This is because of the high cost of food…but also because of the number of people who are going to the food bank at the moment,” Wilson said. “It’s unfortunately a perfect storm.”

The headline inflation rate in Canada fell to 6.9% From a peak of 8.1%, however, food costs are still accelerating and underlying price pressures remain flat.

Meanwhile, the Bank of Canada (BoC) raised interest rates by 350 basis points in just seven months, one of the strongest tightening campaigns ever, to try to bring inflation back to its 2% target.

The result is that Canadian consumers and small businesses are under pressure from both sides, leading politicians, unions and even some economists to appeal to the central bank to slow the pace of tightening.

The bank indicated this week that its tightening campaign is nearing its climax, but made clear that it is not over yet Rates as high as 50 basis points to its highest level in 14 years.

In a TV interview after the decision, Bank of Canada Governor Teff McClem said restoring price stability is not easy, but rampant inflation will be worse.

“I understand that a lot of Canadians are in debt and that interest rate increases will put more pressure on them. It’s something we are watching closely,” he told Radio Canada.

“Everyone is nervous”

Canada, with its expensive homes and the highest levels of household debt in the Group of Seven, is particularly sensitive to high interest rates, with growing fears of the Bank of Canada’s violent hikes. cause stagnation.

Wes Farnell, who runs Eight Ounce Coffee in Calgary with his wife Jane, said their coffee equipment business was growing 25% to 35% a year before the pandemic, then boomed as shutdowns fueled demand for high-end lifestyle devices.

And he’s already seeing signs that heated inflation and recession fears have made consumers focus on necessities rather than luxury appliances, which is adding fewer big orders even as the holiday shopping season approaches.

“Our wholesalers are definitely hesitant about spending the money,” Farnell said. “Everyone is nervous… Will people spend money? Will there be any money to spend? Will inflation go up any further?”

The pain has also been felt on the farm, where record high debt levels and high operating costs are affecting many farmers, despite high grain prices.

For Brody Haugan, who grows with his parents near Orion, Alberta, inflation has been hit hard, along with persistent drought.

With feed prices rising faster than cattle prices, Haugan cut his 400-cow herd by 30% in the spring.

He also delayed the purchase of a much-needed new truck, with the cost rising to C$100,000 from C$75,000 before the pandemic.

“Across the board, the price of everything has gone up, which makes it very difficult to do anything at all,” Haugan said.

(1 dollar = 1.3516 Canadian dollars)

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