Canada's inflation rate jumps to new 31-year high

Canada's annual inflation reached to 6.7 percent in March, the largest year-over-year increase in the consumer price index in over 31 years, government agency Statistics Canada reported on Wednesday.

"The spike in prices over the month of March is the largest monthly increase since January 1991, when the goods and services tax was introduced," Royce Mendes, managing director at Desjardins Group, said on CBC news.

One of the reasons for that increase is the 39.8 percent rise in gasoline costs since March 2021. High gas prices have a significant impact on overall inflation as the cost of shipping and transportation is added to the cost of everything else, from grocery bills (up 8.7 percent) to the price of durable goods like furniture (up by 13.7 percent) and even plane tickets (up by 8.3 percent.)

Statistics Canada said prices were driven higher in March due to the country's hot housing market, supply-chain constraints and the war in Ukraine that has affected oil and food prices, according to the Canadian Press.

The agency said homeowner replacement costs, which include prices for new home prices, rose 12.9 percent year-over-year in March. Grocery store prices rose 8.7 percent year-over-year, the fastest annual rate since March 2009.

Economists and central bankers have warned that Canadians will face sharp price increases in goods and services for longer.

To tame domestic spending and keep long-term inflation expectations anchored closer to its 2 percent target, the Bank of Canada lifted the overnight rate by half a percentage point from 0.50 percent to 1.0 percent last Wednesday, a biggest rate increase in over two decades. Canada's five large banks all increased their prime lending rate by half a percentage point, to 3.2 percent afterwards.

The latest data shown that the higher interest rates start to cool Canada's hot housing market, the Bloomberg reported.

National home sales fell 5.4 percent in March from the previous month, with new listings also declining by about the same amount, according to a Tuesday report from the Canadian Real Estate Association (CREA), which represents more than 100,000 realtors across the country.

"There is a pretty clear sense that the market is softening, as sales and price momentum did show signs of cooling," Robert Kavcic, an economist at Bank of Montreal, said.

March is usually when home sales are high, but this March represented the biggest one-month decline in sales since last June.

The average selling price declined about 3 percent from $816,720 in February to $796,000 in March, according to CREA. Canada Mortgage and Housing Corporation also said that builders started work on an annualized 246,243 housing units last month, down 1.6 percent from February.

Prime Minister Justin Trudeau on Wednesday highlighted key measures in Budget 2022: A Plan to Grow Our Economy and Make Life More Affordable to improve housing affordability for Canadians, saying his government recognizes it is becoming "increasingly challenging" to find a safe and affordable place to live.

The federal government has promised to act on its budget such as an anti-flipping tax for residential properties resold within 12 months, along with a two-year ban on foreign buyers and a homebuyer's bill of rights.

However, among 338 Canada members of Parliament (MPs), at least 20 percent of them hold rental, investment real estate amid housing crunch, Global News (Canada) reported on Tuesday.

The media said at least 65 Canadian MPs hold rental or investment real estate assets according to their filings with the federal conflict of interest commissioner, and the number may actually be much higher because 91 MPs either have not yet completed their disclosure process or their filings haven't been published yet.

Asked on Tuesday what he would say to the 30 percent of his cabinet ministers and dozens of caucus members who are also using real estate as an investment, Trudeau "appeared to defend them", the media reported.

"What we're cracking down on is the fact there are foreign investors and big corporations that buy homes in Canada and then just let them sit, and bid up the prices so that they get more and more expensive, and use them as an asset class for revenue for people who have a lot of money," Trudeau said.