While Canadians are feeling the pain of record-high inflation, among G7 nations we are surpassed by Germany, the U.S., and the U.K., who are also experiencing astronomical rates of increase over the past year.
While much of this inflation is fuelled by pandemic shutdowns and supply chain disruptions, Russia鈥檚 invasion of Ukraine has amplified these existing pressures among advanced economies, which are seeing a price rise in nearly everything 鈥� from food and fertilizers to energy and natural gas.
The spillover effects of COVID-19 and the Russia-Ukraine war are now affecting the pockets of many households in the advanced G7 economies.
With the meeting of G7, Germany, CTVNews.ca compiled data from the (IMF),, and the Organization for Economic Co-operation and Development () to analyze and compared how Canada鈥檚 inflation stands among its G7 peers.
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Inflation hits all G7 nations but the U.K. leads with 9%
While every G7 country saw rising inflation, the 鈥� its highest since the early 1980s. Meanwhile, the U.S. reached its highest level in more than 40 years, at 8.3 per cent. Canada'st inflation also reached a peak at 6.8 per cent, the highest since 1991.
A shows that global economic prospects suffered a huge setback, largely exacerbated by Russia鈥檚 invasion of Ukraine. The report said such events raise economic risks, and policy tradeoffs can become more challenging. Inflation is now a 鈥渃lear and present danger for many countries鈥�, according to the report.
Experts at the IMF project that due to the war-related disruptions, global for much longer than anticipated earlier.
Among its G7 peers, Canada has the fourth highest inflation followed by Italy, France and Japan. With an estimated lowest inflation rate of 2 per cent, Japan is seeing its strongest inflation in three decades.
The central banks across all G7 nations are now rushing to tighten their monetary policy, as many drift away from their inflation targets. Just last month, the Bank of Canada raised its key interest rate target by half a percentage point to one per cent to curb inflation. It has further said there will be more rate hikes.
Ukraine crisis fuels food and energy prices
In a , Bank of Canada deputy governor Toni Gravelle said that a "perfect storm" boosted inflation.
For consumers, this is a double whammy.
The economic upheaval brought by the pandemic and the war in Ukraine has impacted inflation, Gravelle said in his remarks. Regular purchases like gasoline and groceries due to the higher prices for commodities such as oil, wheat, and fertilizer.
Moreover, due to the high cost of production, businesses are passing a portion of this cost to regular households.
According to Statistics Canada, higher prices of fertilizer and natural gas have increased the cost for farmers, who have passed along some of these costs to consumers.
Almost all G7 nations are now feeling the pain of high food prices.
While the U.S has the highest food inflation among all G7 nations, the U.K.鈥檚 cost of food is also , along with .
Recent data from OECD shows that Canada has the second highest food inflation among its G7 peers.
Experts in Canada say that rising inflation will push more Canadians to the risk of hunger as inflation outpaces their grocery budgets.
One of the leading contributors to fuel inflation is energy prices.
With Russia supplying around and 11 per cent of oil, energy prices have jumped alarmingly and this holds true for all G7 nations. Canada lags behind G7 nations, when it comes to energy prices.
European countries in G7 are taking a bigger hit.
Among the G7 economies, Germany is the and the steep price hit is being felt by its industrial-heavy business sector as well as consumers. According to , gas spot prices in Europe are more than 10 times higher than they were a year ago. The cost of oil has also doubled over the same period.
To combat the rising energy prices, Germany recently slashed its fuel tax through a US$16.5 billion energy package. Other European G7 nations have taken similar steps.
With the ongoing Ukraine crisis, France also introduced new measures to help households, companies, farmers, and fishermen cope with rising energy prices. Last year, France capped gas and power price increases and offered financial handouts to low-income households. To shield companies and consumers from higher bills, Italy approved . The package will cover 5.2 million families keeping their energy bills at the level seen last summer.
Ahead of the G7 meeting, in a recent speech to the on Tuesday, U.S. Treasury Secretary Janet L. Yellen commended European leaders for their proposal to phase out all Russian energy supplies within six months.
鈥淣o country controls the wind and the sun. Let鈥檚 make sure that this is the last time that the global economy is held hostage to the hostile actions of those who produce fossil fuels,鈥� she said.
