Inflation expected to increase as Sask. rate sits above national average: economist

Saskatchewan’s inflation rate exceeded the national average for July, which did not come as a surprise for a Regina-based economist.

“We're only exceeding them [the national average] by a little bit, and prior to this, we were lagging behind. So I think some of this is catch up,” Jason Childs, an associate professor of economics at the University of Regina, explained.

“Some of that is we haven't seen breaks and things like gas prices the way other jurisdictions have.”

Saskatchewan recorded an 8.1 per cent inflation rate for the month of July, while the national average was 7.6 per cent for the same time period.

Inflation is described as the rate of increase in prices over a given time. Inflation leads to a decrease in the purchasing power of money.

“If you look at the aggregate numbers. In the last two years, any money you've had in the bank has lost about 12 per cent of its purchasing power,” said Childs.

“You can buy 12 per cent less with $100 today than you could two years ago.”

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The added financial burden hasn’t gone unnoticed for many Regina residents.

“Especially with groceries, I’ve noticed that I pay more attention on how much I’m spending on like, meat and just like every day stuff that it seemed like it was cheaper even last year or the year before,” Halle told CTV News on her walk through Wascana Park.

“I always see what stores have the best deal each week.”

For Regina residents Stu and Celina, they aren’t personally impacted in their retirement, but they do see the increases happening around the city.

“The prices are obviously higher and if we weren’t comfortably retired, we might have an issue,” Stu explained.

Inflation has been on the rise in the aftermath of the COVID-19 pandemic, mainly due to a large expansion of demand coupled with supply chain interruptions.

“We've gotten too many dollars chasing the same goods,” Childs explained. “That's going to drive up prices across the board.”

Also contributing to the issue is the massive influx of government spending in the face of pandemic disruptions to employment and businesses as a whole.

“You can’t pump that much liquidity into the system, that many dollars … without having an effect on prices,” said Childs.

The rate of inflation may fall slightly in the short term according to Childs. However, the issue of inflation as a whole has yet to run its course.

“We're starting to see interest rates creep up, which should slow things down, a little bit. But we haven't broken the back of this yet,” he said.

“We're still in a situation where we’re seeing governments, provincial and federal, pushing more money out into the system stimulating demand, creating more demand for products without really expanding supply.”

For inflation to be successfully countered, government spending must be slowed down in conjunction with a rise in interest rates by the Bank of Canada, Childs said.

“Well, firstly, slow down spending, cut back on spending, don’t be pumping more money, more liquidity into the system. The second thing, the Bank of Canada is going to have to continue to raise rates and convince people that it's actually serious about fighting inflation,” Childs explained.

“That means higher interest rates and that'll slow down borrowing, they'll slow down investment, that'll slow down that sort of expansionary push that we've been seeing for the last several years.”

Statistics Canada’s Consumer Price Index (CPI) rose 7.6 per cent on a year-over-year basis in July nationally – down slightly from an 8.1 per cent gain in June.

Saskatchewan and British Columbia were the only two provinces in Canada whose CPI increases did not slow down month over month.

Statistics Canada attributed the national deceleration to slower year-over-year growth in gasoline prices.