OTTAWA (Reuters) -At the gas pumps and in the grocery store, on their utility bills and especially when looking for housing, Canadians are feeling the pinch of red-hot inflation and that could hurt the ruling Liberals in an upcoming federal election.
Canada’s annual inflation rate accelerated to 3.7% in July, its fastest clip since May 2011, data showed on Wednesday, beating analyst estimates and prompting Prime Minister Justin Trudeau’s rivals to pounce.
“It’s clear that we have a cost-of-living crisis under Justin Trudeau,” said Conservative Leader Erin O’Toole while campaigning in Quebec City.
Trudeau hit back later from Vancouver, saying Conservative plans to scrap the Liberal’s subsidized daycare initiative would make life more costly for families and hurt the economy.
“In terms of cost-of-living, I don’t think Erin O’Toole can be considered serious when he’s turning his back on getting women into the workforce,” he said.
Trudeau called the election on Sunday, two years ahead of schedule, in hopes that the successful national COVID-19 inoculation campaign and an economic rebound would propel his Liberals to a majority on Sept. 20.
But inflation may prove to be a spoiler.
“(Higher inflation) is certainly something that the average Canadian has noticed, particularly when you talk about housing and rent… Some political parties might use that,” said Jimmy Jean, chief economist at Desjardins Group.
Jean added that hot inflation is not a Canada-only issue, with much of heat caused by global “pandemic distortions.” Countries around the world are reopening their economies and that is putting pressure on goods, leading to rising prices.
In Canada, inflation gains were led by shelter prices, with the homeowners’ replacement cost index rising at its fastest rate since 1987. The average selling price of a Canadian home has jumped 15.6% in the last year.
That has put housing front-and-center in the election, with O’Toole’s Conservatives pledging a two year ban on non-resident foreigners buying Canadian property, while New Democrat leader Jagmeet Singh promised a 20% tax for foreign buyers.
The Liberals lead nationally with 34% of the vote to the Conservatives’ 28%, with the New Democrats tracking at 22%, according to an Abascus Data poll released on Wednesday.
HOT HOT HOT
While July’s headline number was a surprise, it is unlikely to faze the Bank of Canada, which has said it expects inflation to stay at the top of its 1%-3% control range this year, before easing back to the 2% target in 2022.
Indeed, Governor Tiff Macklem took the unusual step last month of penning a newspaper column to tell Canadians not to fret about the cost of living rising out of control.
“The Bank of Canada very much wants to disabuse people of the notion that what they are doing is in any way reckless,” said Andrew Kelvin, chief Canada strategist at TD Securities.
The Canadian dollar rallied after Wednesday’s inflation data but then gave up its gains to trade at 1.2635 per U.S. dollar, or 79.15 U.S. cents, nearly unchanged on the day.
($1 = 1.2625 Canadian dollars)
(Reporting by Julie Gordon in Ottawa; additional reporting by Steve Scherer in Ottawa, Fergal Smith and Nichola Saminather in Toronto; Editing by Kirsten Donovan, Alex Richardson and Barbara Lewis)