Inflation in the grocery sector showed signs of easing in March, increasing by just 1.9% compared to the same month last year, marking a significant drop from February’s 2.4% and a stark contrast to the late 2022 peak of 11.4%. Despite this slowdown, Canadians continue to face financial pressures as both shelter costs and interest rates rise.
Amidst this backdrop, major Canadian grocery chains have faced scrutiny from politicians, prompting calls last fall for these businesses to outline their strategies to combat food price inflation. This scrutiny has led to a noticeable shift in consumer behavior, with more individuals turning to discount grocery stores and opting for private-label products over branded ones. In response, major chains like Loblaw have expanded their discount retail offerings, opening over 30 new Maxi and No Frills stores in the past year.
Despite the decline in grocery price inflation, RBC Capital Markets analyst Irene Nattel warned that the cumulative price increases over recent years continue to burden household budgets, suggesting that consumer price sensitivity and value-seeking behaviors are likely to persist.
Conversely, restaurant inflation remains robust. Prices for food purchased from restaurants increased by 5.1% in March, maintaining the rate observed since the beginning of the year. This trend is particularly pronounced in the fast food and takeout sectors, which saw a 6.4% rise in prices over the past year.
Restaurants Canada highlighted the challenges within the restaurant industry, noting that nearly two-thirds of restaurants are operating at a loss or just breaking even. Bankruptcies in the sector reached a decade-high last year, exacerbated by weak sales as consumers cut back on discretionary spending amid rising costs.
According to Statistics Canada, restaurant prices were among the top five contributors to overall inflation in March, alongside mortgage interest, rent, gasoline, and car insurance premiums. Overall inflation for the month was 2.9%, a slight increase from February. Food inflation, encompassing both groceries and restaurant meals, stood at 3% in March.