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The Wal-Mart effect: food inflation tame in Canada Add to ...

Food inflation is flaring up around the world, but not in Canada -- at least not yet.



Food prices are up 1.7 per cent in December from a year ago, a bit higher than the 1.5-per-cent rate in November but well below Canada’s overall inflation rate of 2.4 per cent.



It’s a far cry from India, where food inflation is running at 16 per cent. The United Nations measure of food prices hit a record last month amid surging commodity prices like energy, rising demand and poor weather in some parts. Price pressure has even forced McDonald’s Corp. to raise prices on some items.



“Food inflation is still relatively low in Canada...especially compared with other countries,” says Charles St-Arnaud at Nomura Global Economics in New York.



Canadians have been shielded, for several reasons. Competition is heating up in the retail sector, with pressure from the likes of Wal-Mart forcing other retailers to keep prices in check. And a currency at parity is reducing the cost of imports, and prompting some stores to trim prices.



Last year, food prices averaged just 1.4 per cent higher, a steep slowdown from 2009, when they rose 4.9 per cent. Prices for food bought from stores rose just 1 per cent, much slower than the 5.5-per-cent rise in 2009.



“The smaller increase in food prices can be largely explained by falling prices for fresh fruits and vegetables...and by softer price increases for meat as well as for bakery and cereal products,” Statistics Canada says.



If there is any heat on the food side, it’s from eating in restaurants. Food bought in restaurants rose 2.4 per cent from a year earlier, led by an increase in table-service establishments.



Here is a sample of some other changes in food prices in December, and how they compared with a year earlier:



  • Ham and bacon: 8.6 per cent.


  • Canned and preserved fish: -4.1per cent.


  • Cheese: 0.7 per cent.


  • Pasta: -5.7 per cent.


  • Tomatoes: -20.6 per cent.


  • Wine bought from stores: -1 per cent.


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