Brace for gas price ‘shock’ in inflation numbers out Monday, say economists

Gas prices are advertised at station signs off the Trans Canada in northwest Calgary on April 15. Photo by Brent Calver/Postmedia files

Article content

Economists are expecting the high price of gas to “shock” the consumer price index (CPI) when Statistics Canada releases its March inflation report on Monday.

Article content

Gas prices spiked 21 per cent between February and March as the war in Iran and resulting near-closure of the Strait of Hormuz reduced the flow of oil from the Middle East and pushed up global energy prices.

Article content

Article content

Article content

The month over month price jump for gas is the highest on record for data dating back to 1950 and tops the 17 per cent rebound from pandemic-era lows between April and May 2020, said Douglas Porter, chief economist and managing director at Bank of Montreal (BMO).

Article content

Article content

“Even during Russia’s invasion of Ukraine, we never had a month that was (higher than) a 12 per cent increase,” he said. “So that is going to be a bit of a shock in next week’s CPI.”

Article content

Canada’s headline inflation rate rose 1.8 per cent on a year-over-year basis in February. BMO forecasts it will come in at 2.6 per cent in March and above three per cent in April.

Article content

Porter said the federal government temporarily suspending the fuel excise tax on gasoline starting April 20 is a “big step in the right direction,” but the savings of 10 cents per litre will only counter a portion of the run-up and that relief could be wiped out if prices rise further.

Article content

Energy costs are just one factor that affects grocery bills, but Porter said the energy price spike does threaten some of the “modest progress” on grocery inflation seen in recent months.

Article content

Article content

“At this point, we’re expecting food prices on average to rise a little bit more than four per cent this year,” said Porter. “I think the risk is somewhat to the high side of that call.”

Article content

Article content

Food would be among the first items affected by sustained high oil prices, said Nathan Janzen, assistant chief economist at Royal Bank of Canada (RBC). However, he said it would happen over a period of months, not weeks, as businesses are typically hesitant to pass on price increases to their customers until they need to.

Article content

RBC expects inflation to come in at 2.5 per cent in March and above three per cent in April.

Article content

Janzen said food price growth as measured in the CPI will probably slow in March due to distortions from last year’s GST/HST holiday, which removed the federal portion of sales tax on specific items between Dec. 14, 2024, and Feb. 15, 2025, including restaurant meals and certain grocery products.

Article content

However, Janzen noted that grocery prices have already been running above the broader rate of inflation for some time. Last month, Statistics Canada said grocery prices have climbed 30 per cent over the last five years.