Inflation in Canada hits its highest level in 18 years within days of election

OTTAWA, Sept. 15 (Reuters) – Canada’s annual inflation rate accelerated to an 18-year high in August, driven by broad upward pressure on prices, data showed Wednesday, a few just days before a hotly contested federal election that could see Prime Minister Justin Trudeau ousted Liberals.

The rate rose to 4.1% in August, its fastest figure since March 2003, according to Statistics Canada, beating analysts’ estimates and prompting Trudeau’s main rival to jump on the rise in the cost of living.

“The numbers released today clearly show that under Justin Trudeau, Canadians are in an affordability crisis,” Erin O’Toole, leader of the main opposition Conservative party, said in a statement.

The Conservatives have a narrow lead over the Trudeau Liberals at 31.2% to 30.5% just days before the September 20 vote, according to a new poll from Nanos Research. The left-wing New Democrats are third at 21.4%.

Countries around the world grapple with high inflation amid supply chain hurdles and labor shortages as restrictions are relaxed and tightened with each new wave of the virus, resulting in unstable demand and supply bottlenecks.

The Bank of Canada has said it expects headline inflation to stay above its 1% to 3% control range this year, before returning to the 2% target in 2022.

“This does not mean anything in the short term for the Bank of Canada. They have insisted a lot that the inflationary shock is transitory,” said Andrew Kelvin, chief strategist for Canada at TD Securities.

In Canada, the sharp rise in inflation was due to high gasoline prices, rising housing costs and soaring prices for goods such as furniture, appliances and vehicles, as well as costs. travel-related high levels as restrictions have eased.

It was the opposite of the United States, where a brutal fourth wave put the brakes on travel.

“It’s really the opposite mirror to what we saw in the United States yesterday, where the travel components were showing signs of cooling. Here, they are showing signs of warming, ”said Jimmy Jean, chief economist at Desjardins Group.

“It’s still part of the reopening effect. In August, we were still getting back to normal,” added Jean.

Analysts polled by Reuters had expected the annual inflation rate to reach 3.9% in August. At 4.1%, this is the highest since the 4.2% recorded in March 2003.

The three measures of core inflation all posted gains. The common CPI, which the Bank of Canada considers the best indicator of the economy’s underperformance, edged up to 1.8% from 1.7% in July.

The Canadian dollar was trading 0.2% at 1.2663 against the greenback, or 78.97 cents US.

Additional reporting by David Ljunggren in Ottawa and Fergal Smith and Nichola Saminather in Toronto; Editing by Andrew Heavens, Paul Simao and Andrea Ricci

Our Standards: The Thomson Reuters Trust Principles.