Consumer prices expected to keep on rising in 2022

Supply chain woes persist

Supply chain glitches worldwide are causing product shortages, and price hikes for food and consumer goods.

Economists across North America in recent months have debated whether inflation is transitory and caused by temporary supply chain disruption or whether it is here for the long term.

One consensus is that there is no one-size-fits-all inflation gauge for the retail sector because it comprises a wide range of items.

Food consumes about 16.4% of the average household budget, according to Statistics Canada data for 2019.

Canada’s Food Price Report 2022, produced by the University of British Columbia and three other Canadian universities, projects that Canadian food prices will increase an average of between 5% and 7% this year. That is the highest predicted increase in the 12 years that university researchers have produced the annual report.

Some academics are skeptical about reports projecting massive price inflation.

“Why pull the alarm bell?” asked UBC professor James Vercammen. “There’s no real evidence of long-term price inflation, and when I look back over the years of various disruptions, we seem to always come through it better than expected.

Retail Council of Canada CEO Diane Brisebois told BIV that retail inflation stems from a confluence of factors, including COVID-19 shutdowns at factories, restrictions on retail stores during the pandemic and climate change.

Brisebois lamented how things have changed, compared with early fall last year, when it seemed promising that retailers could soon get operations back to normal.

Then the Omicron variant started spreading, spurring new lockdowns and supply chain disruptions.

Executives let loose with a steady stream of warnings about risks to their supply chains.

“We certainly are experiencing, and hearing a lot about, labour shortages,” A&W Food Services of Canada CEO Susan Senecal told an investor conference call in October.

That same month, Aritzia CEO Brian Hill told investors that his company was struggling to get products to stores.

“We see these shortages continuing,” he said. “The shortages are twofold. They’re, one, because we have factory disruptions through the effects of COVID-19 in some of these countries that we’re dealing with … and then, the second thing is the freight times, and shipping times, are exponentially longer than they were. So, it’s a double whammy.”

Hill said Aritzia needs to spend more money to build stores, to make products and to ship products than it did previously.

“It’s costing more money to hire people, and get them on our teams,” he said. “It’s costing more everywhere we look.”

Retail analyst and DIG360 owner David Gray expects supply chain glitches to continue through 2022.

He told BIV that Bank of Canada interest-rate hikes could be a wild card that buffets some retailers even harder than expected.

“This would be a game changer in terms of disposable income and consumer confidence, after so many years of exceptionally low rates. Think of all the young adults who have not experienced true inflation.”

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