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How serious is food inflation in Canada?

Statistics Canada claims our food inflation rate is at 2.7%. But the agency may be significantly underestimating, says Sylvain Charlebois.

If you think food prices are increasing at a much faster pace than what Statistics Canada suggests, you’re likely not imagining it.

For a few years, many Canadians have suspected that the federal agency was either underestimating our food inflation or there was some lag between what was going on at the grocery store and what was reported.

We now know a little more about what’s happening, at least this year.

BetterCart, a Canadian company that monitors food prices across the country daily, has a slightly different reading on how food inflation is impacting Canadians’ food affordability.

BetterCart mines its data from flyers, websites and several other sources to measure the cost of a number of food products. The company has started to compare its data with Statistics Canada’s Consumer Price Index (CPI), which is published every month. In some cases, variances reported by Statistics Canada are higher but in many cases they’re much lower than what BetterCart is finding.

The investigation continues but evidence suggesting that Statistics Canada is underestimating food inflation is mounting.

For example, while the CPI report indicates that the price of ketchup has dropped by 5.9 per cent, BetterCart suggests ketchup is up by 7.3 per cent since January. Potatoes are 11.5 per cent more expensive than in January versus the 3.7 per cent suggested by the CPI. Frozen french fries are similarly more expensive – 26.2 per cent more expensive since January, not 5.9 per cent as the CPI reports. Bananas are 4.9 per cent more expensive according to BetterCart, not 0.1 per cent more.

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Butter offers the most shocking difference. BetterCart believes butter in Canada is up a whopping 35.5 per cent compared to a timid 2.8 per cent estimated by the CPI report. Following a scandal in the spring that revealed how dairy producers were using more palm oil byproducts, price hikes were expected.

Statistics Canada’s website is very explicit about its methodology and how it accounts for its data capture. The federal agency provides many details about process and reporting, but it never discloses what brands it looks at, what stores or how the data is processed.

Another issue is shrinkflation, which is about shrinking packaging sizes and offering smaller quantities while retail prices remain intact.

While a Statistics Canada website talks about how it measures the impact of shrinkflation, about 70 per cent of products in its food basket are listed at quantities that no longer exist in the market.

BetterCart converted to market-based quantities rather than what’s reported by Statistics Canada to better appreciate the impact of different packaging formats over time.

Such an analysis shouldn’t be considered evidence that Statistics Canada is failing. Statistics Canada has a stellar reputation when it comes to measuring macroeconomic metrics to give our policy-makers, industry and consumers a better sense of what’s happening.

Most experts and academics rely on the federal agency to tell us what’s happening. The CPI is likely accurate about many aspects of our economy. Those aspects include durable goods, automobiles, energy and lodging.

But food distribution is becoming more complicated. Market dynamics have become much more intense. Food sector market undercurrents may be harder to pick up than five or 10 years ago.

This is obviously an important issue, since most Canadian social policies are influenced by authoritative data. That data is always intertwined with science-based decisions to set public programs designed to offset any negative pressures related to the cost of living in Canada.

But Statistics Canada could be underestimating food inflation by at least 1.5 per cent. A 1.5 per cent increase for an average family of four would represent $180 to $200 worth of food a year.

Statistics Canada’s CPI methodology may not require a complete overhaul but it certainly needs some tweaking. Since prices are changing more quickly, some of the data-capturing process needs work and certainly more transparency.

Statistics Canada claims it changes its food basket constantly but it still only monitors baked beans as a vegetable-protein-based product. When it comes to fish and seafood, canned salmon is basically it. That’s not quite what Canada’s Food Guide recommends these days.

Many Canadians have started to view CPI statistics with some disbelief, especially when it comes to the price of food. Their reality at the grocery store doesn’t mirror Statistics Canada’s analysis of that marketplace. And that could hurt the federal agency’s reputation over time.

Dr. Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University.

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