The federal government’s temporary tax break may have aided in a slight decrease to the cost of living in Canada, but Albertans are still feeling the financial pinch as higher prices for gasoline and shelter raise the province’s annual inflation rate.
From December to January, Alberta saw its inflation rate climb 0.2 per cent. Its annual inflation rate for January now sits at 2.5 per cent compared to the same time last year, which ranks second in the country behind Manitoba at 2.7 per cent.
Canada’s annual inflation also rate ticked back up in January to 1.9 per cent, Statistics Canada reported on Tuesday.
Without the tax break, Statistics Canada said the annual inflation rate would have accelerated to 2.7 per cent, up from 2.3 per cent in December.
ATB Financial Chief Economist Mark Parsons says prices got a full month-long effect of the federal government’s tax break, but a spike in gasoline to start the year offset government relief.
“Energy prices are rising at faster rates in Alberta, and part of that is gasoline prices with the fuel tax now being reinstated,” he said.
“Shelter costs are rising at a faster rate in Alberta, reflecting a tighter housing market, finally, the GST/HST holiday had a larger downward effect in provinces with an HST. Alberta does not have an HST, it just has a GST.”
According to Statistics Canada, Alberta saw some of its largest prices increase from shelter (+4.86 per cent), energy (+6.59 per cent) and gasoline (18.88 per cent).
The federal agency also notes that Canadian natural gas prices rose 4.8 per cent annually in January, with an increase in demand pushing prices higher in Ontario and Quebec from an oversupply a year ago.
Meanwhile, Calgary’s inflation rate sits slightly higher than the province at 2.7 per cent.
Meaghon Reid, executive director of Vibrant Communities Calgary (VCC), notes that high prices for shelter as the city increase its population are putting pressure on those living below the poverty line.
“While the cost for one and two bedrooms have been coming down pretty steadily, there’s still a lot of people paying a very high rent – usually much more than 30 per cent of their income – and there’s still a housing shortage for larger families,” said Reid.
“We’re also hearing about food, which is still continued to be high in price, particularly with this threat of tariffs, and so I think these are things that are considerations in a place like Calgary.”
Reid adds that Alberta’s minimum wage has also been frozen at $15 since 2018, and has since fallen to last place in the country since four provinces bumped up their rates last October.
According to a VCC report, the living wage in Calgary is now 63 per cent higher than Alberta’s minimum wage, which is tied with Saskatchewan for the lowest in Canada.
Calgarians are also paying about 10 per cent more for food and about $2,000 more for shelter annually.
“If people aren’t meeting those basic needs, that’s a real problem, and it’s going to become very expensive for the province to service if we don’t figure this out quickly,” said Reid.
“A living wage will allow people in a city like Calgary – or anywhere in Alberta – to make sure that they’re covering all of their basic needs and that they’re not, for example, going without medication so that they can eat that day.”
Tariff threats add uncertainty to food prices
The looming threat of tariffs from the United States is also adding to inflationary pressures in Alberta.
Stuart Smyth, a University of Saskatchewan professor in the Department of Agricultural and Resource Economics, says higher gas prices and heating prices, particularly with the reintroduction of Manitoba’s fuel tax, have led to an increase in food costs.
The threat of tariffs is only going to continue to see those prices climb.
“I would expect that uncertainty is getting priced into the contracts, particularly for fruit and vegetables that will be coming in from the southern United States at this time of year,” said Smyth.
“It may add a fraction of a per cent, or somewhere between one and two per cent to the overall cost of those contracts. I think that uncertainty around what the tariff will be for that period of time through the end of January will have contributed a little bit to food inflation.”
Bank of Canada decision looming
The annual inflation rate continues to face upward pressure from mortgage interest costs, increasing at a rate of 10.2 per cent from a year ago, though this is the 17th consecutive month of deceleration after a peak of 30.9 per cent in August 2023.
With an increasing share of inflation components rising faster than three per cent in January, Royce Mendes, managing director and head of macro strategy at Desjardins, said he’s sticking with his belief that the central bank will hold rates steady when it meets again in March.
“But that call is still contingent on tariff news and upcoming data releases co-operating,” he said.
Parsons, however, expects there will be more of an upward threat on inflation over the next couple of months because the GST holiday is over.
“The Bank of Canada is going to be happy that, you know inflation is holding near target, and that will keep them in cutting mode,” he said.
“I mean, you can expect a slower pace of cuts going forward, and heading back to the neutral range, but overall the inflation picture looks relatively good in Canada compared to the United States.”
The Bank of Canada will make its next interest rate decision on March 12.
