An economist has indicated that grocery prices in Canada may be stabilizing as various economic factors come into play. Moshe Lander, an economist at Concordia University, shared insights suggesting that improved supply chains, cooling demand, a stronger Canadian dollar, and paused tariffs may alleviate some of the pricing pressures Canadians have been facing at the grocery store.
Lander forecasts that grocery prices, particularly for fruits and vegetables, are anticipated to stabilize over the coming months, experiencing only minor increases. He remarked, “So no major drop, but maybe a little stabilizing or a little bit of inflation, yeah, and that would be in line with the rest of the economy as well.” This modest expectation aligns with broader economic trends as inflation rates adjust.
The appreciation of the Canadian dollar plays a critical role in shifting consumer preferences back towards domestically grown produce, especially as the growing season begins. As of Wednesday, the Canadian dollar was trading at US$72.53, which signifies a 4.3% increase. Lander explained that a stronger dollar could deter imports, encouraging consumers to buy homegrown products which have become more readily available. “You could imagine then that prices would fall,” he stated.
According to Statistics Canada, the Consumer Price Index (CPI) for food in March was recorded at 3.2%, reflecting a slight uptick of 0.1% from February, although this figure marks a continued decrease from a peak of around 11% experienced in 2022. Lander noted that with the overall inflation rate dropping to 2.3% in March, the likelihood of a significant decrease in food prices remains low, even with the currency's recent strength. He emphasized that even amidst these changes, price contracts formed in advance will not be influenced by current inflation trends until they are renegotiated.
Lander pointed out the common misperception among Canadians regarding inflation and grocery prices. Many citizens are expecting prices to revert to pre-COVID levels as inflation stabilizes. However, Lander clarified, “I think the big disconnect that Canadians are having right now is that, having heard that inflation is back under control, they go to the grocery store and they say, ‘I don’t see prices falling; I just see that they aren’t rising as quickly as they used to.’” He emphasized that low inflation does not equate to falling prices but rather indicates a slower rate of increase.
Another contributing factor to the potential stabilization in grocery prices is the recent pause on U.S. tariffs regarding Canadian imports, which provides some breathing room for importers and relieves some cost pressures. Additionally, with the federal government’s decision to reduce immigration targets, Lander suggests that overall demand for food may lessen, which could further mitigate inflationary pressures on prices.
Lander concluded his analysis with the assertion that while dramatic price drops are not expected in the near future, the days of significant price spikes may be behind Canadians for the time being. However, he cautioned that this trend could reverse depending on broader economic conditions or changes in trade policies, particularly if tariffs imposed by the U.S. are reinstated.
