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By Derek Craddock

WORRIED ABOUT INFLATION

Local business owners, economists worried following latest inflation report

Jan 20, 2022 | 12:00 PM

Some staggering inflation numbers were released earlier this week, and some are worried about how big the impact will be.

In its monthly report released Wednesday, Statistics Canada showed the Consumer Price Index rose 4.8 per cent in December year-over-year, its highest since 1991.

Rising food costs, vehicle purchases, and housing were just some of the factors linked to the rise in inflation.

In Saskatchewan, the Consumer Price Index rose by about 3.5 per cent, and while that is lower than the national stats, it still brings some concern for many struggling to get by.

Dr. Enchuan Shao is an Assistant Professor at the University of Saskatchewan in the Economics Department. He said there are many people that will feel the brunt of these rising costs.

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“For lower-income or middle class, typically, they don’t have much savings. Lots of reliance on a paycheck. They don’t have much buffer to counteract those shocks especially in this high inflation environment.”

He said those low and middle-class income earners are often overlooked when it comes to impacts of inflation, leading to a larger gap in wealth inequality.

“There’s a supply chain disruption and it seems like it may be permanent. That’s why in the near term, we are still in the recovery mode.”

He added unless action is taken by the central bank, there will be no short-term end to the rising costs.

Meanwhile, inflation is already putting a major strain on small business owners.

CEO of the Prince Albert Chamber of Commerce Patty Hughes said members have already had discussions about the rising costs and how it will impact them.

However, she notes the concerns go far beyond things like food prices, fuel, and vehicles.

“What a lot of our chamber members are seeing like, if you’re in the construction industry, they’re seeing anywhere from 15 to 20 per cent on supplies and they’ve been told to pre-order because that’s what it’s dissipating to be coming down.”

She added other factors like last summer’s drought in the Prairies and global supply chain issues are also posing problems for businesses.

While there is talk that things could cool down in the spring, Hughes said there is still some hesitation.

“There were some announcements that just kind of came through in regard to the trucking industry and that’s going to significantly impact our supply chain and contributes. Until some of those issues get worked out at the federal level, I think this is something that we’re going to be weathering for a little while longer.”

The Bank of Canada has said that it would act to stop runaway inflation and is scheduled to make a rate announcement next week. Jean-Francois Perrault with Scotiabank expects the bank to start raising rates next week and in the coming months and is forecasting the rate will hit two per cent by the end of 2022.

The only reason to delay may be to see what happens with this latest wave of the pandemic, which has seen a surge in cases and hospitalizations, as well as higher absenteeism rates as exposed workers isolate at home.

If the bank delays acting, BMO chief economist Douglas Porter said to expect a warning of rate hikes starting in March to at least manage inflation expectations and start to cool demand for goods.

–With files from The Canadian Press.

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derek.craddock@pattisonmedia.com

On Twitter: @pa_craddock