While Canadians feel the pain of record inflation, among the G7 countries we are overtaken by Germany, the United States and the United Kingdom, which are also experiencing astronomical rates of increase over the last year.
While much of this inflation is fueled by pandemic shutdowns and supply chain disruptions, Russia’s invasion of Ukraine has amplified these existing pressures among advanced economies, which are seeing rising prices in almost everything – from food and fertilizer to energy and natural gas.
The fallout from COVID-19 and the Russian-Ukrainian war is now affecting the pockets of many households in advanced G7 economies.
With the G7 finance ministers meeting underway this week in Bonn, Germany, CTVNews.ca has compiled data from the International Monetary Fund (IMF), Statistics Canada and the Organization for Economic Co-operation and Development (OECD ) to analyze and compare how Canada’s inflation ranks among its G7 peers.
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Inflation hits all G7 countries, but UK leads with 9%
While all G7 countries saw rising inflation, the UK soared to 9% in April, its highest level since the early 1980s. Meanwhile, the US hit its highest level in more than 40 years, at 8.3%. Canada’s highest inflation also peaked at 6.8%, the highest since 1991.
A recent IMF report shows that the global economic outlook has suffered a huge setback, largely exacerbated by Russia’s invasion of Ukraine. The report says such events increase economic risks and political trade-offs can become more difficult. Inflation is now a “clear and present danger for many countries”, according to the report.
IMF experts predict that due to the war-related disruptions, global inflation will remain high for much longer than previously expected.
Among its G7 peers, Canada has the fourth highest inflation rate, followed by Italy, France and Japan. With an estimated lowest inflation rate of 2%, Japan is experiencing its highest inflation in three decades.
Central banks in all G7 countries are now rushing to tighten monetary policy as many stray from their inflation targets. Just last month, the Bank of Canada raised its target rate by half a percentage point to 1% to rein in inflation. He further stated that there would be further rate hikes.
Ukraine crisis inflates food and energy prices
In a recent speech in Montreal, Bank of Canada Deputy Governor Toni Gravelle said a “perfect storm” had boosted inflation.
For consumers, it’s a double whammy.
The economic upheavals caused by the pandemic and the war in Ukraine have had an impact on inflation, Gravelle said in his remarks. Regular purchases like gasoline and groceries will continue to increase due to rising prices for commodities like oil, wheat and fertilizer.
Moreover, due to the high cost of production, companies pass on part of this cost to ordinary households.
According to Statistics Canada, higher fertilizer and natural gas prices have increased costs for farmers, who have passed some of these costs on to consumers.
Almost all G7 countries are now feeling the pain of high food prices.
While the US has the highest food inflation of any G7 country, the cost of food in the UK is also rising sharply, along with concerns about food shortages.
Recent data from the OECD shows that Canada has the second highest food inflation among its G7 peers.
Experts in Canada say rising inflation will put more Canadians at risk of going hungry as inflation outstrips their grocery budgets.
One of the main contributors to fuel inflation is the price of energy.
With Russia supplying around 19% of the world’s natural gas and 11% of oil, energy prices have jumped alarmingly and this is true for all G7 countries. Canada lags behind the G7 countries when it comes to energy prices.
The European G7 countries are hard hit.
Among the G7 economies, Germany is the most dependent on Russian fuel, and the sharp drop in prices is felt by its industrial-intensive commercial sector as well as by consumers. According to recent data from the OECD, spot gas prices in Europe are more than 10 times higher than a year ago. The price of oil also doubled over the same period.
To combat rising energy prices, Germany recently reduced its fuel tax through a US$16.5 billion energy program. Other European G7 countries have taken similar steps.
With the ongoing Ukrainian crisis, France has also introduced new measures to help households, businesses, farmers and fishermen cope with rising energy prices. Last year, France capped gas and electricity price hikes and offered financial aid to low-income households. To protect businesses and consumers from higher bills, Italy approved a US$4.9 billion package. 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 at the Brussels Economic Forum on Tuesday, US Treasury Secretary Janet L. Yellen praised European leaders for their proposal to phase out all Russian energy supplies within six months. .
“No country controls the wind and the sun. Let this be the last time the global economy is held hostage by the hostile actions of those who produce fossil fuels,” she said.