Canadian Consumer Price Index Increases 3.4% on an Annual Basis in 2021

Statistics Canada (StatsCan) reported today (1-19-22) that the Canadian Consumer Price Index (CPI) increased 3.4% on an annual average basis in 2021. This is the fastest pace since 1991 (+5.6%) and it follows a 0.7% increase in 2020. Excluding energy, the annual average CPI rose 2.4% in 2021 — a faster pace than the 1.3% recorded in 2020 and 2.3% in 2019.

While annual average growth was 3.4% in 2021, price growth differed between the first half and second half of the year. The pace of year-over-year price growth was faster in the second half of the year, especially from August to December, when price growth exceeded 4% each month. There was a consistent upward trend in the monthly CPI throughout 2021, with the lone monthly decline occurring in December 2021.

Among the eight major components that make up the CPI, seven posted gains, with transportation prices leading the way with a 7.2% increase. Only clothing and footwear posted a -0.3% decline in 2021.

The report noted that in 2021, the COVID-19 pandemic remained a key factor impacting the prices of goods and services purchased by Canadians. Inflationary pressures stemmed from a combination of widespread global supply chain constraints and pent-up consumer demand as the economy reopened. The reopening was made possible as COVID-19 vaccines became widely available and public health restrictions began to ease. Canadians were able to go out and shop, dine, and travel more than in 2020. In addition, more Canadians returned to work. By September 2021, employment had recovered to pre-pandemic levels and Canadians were consuming more, especially during months when public health measures had eased.

At the same time, the global economy grappled with significant supply chain disruptions throughout 2021, including input shortages, production bottlenecks, backlogs at key ports, higher shipping costs, and delivery delays. These constraints limited the supply of goods and services.