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Covid-19: The effect the virus has had on inflation

Covid-19 has had a major impact not only on our lives, but our pocketbooks as well. This article will look at the real-life statistics, as published by StatsCan, and compare affordability, and its trend since the start of Covd-19.

Gas prices:

Data received from: Statistics Canada. Table 18-10-0001-01  Monthly average retail prices for gasoline and fuel oil, by geography

Gas prices are what most people have noticed most since the start of covid. As can be seen in the graph, prices have been volatile since covid. During the peak of 2020 shutdowns in March, gas prices actually fell due to the severe drop in demand coming from the shift to work-from-home, among many other policies that most businesses enacted. Since then, gas prices have continued to rise, and are about 20% higher than they were in December 2019.

CPI Inflation: Canada’s measure of inflation

Data received from Statistics Canada. Table 18-10-0004-01  Consumer Price Index, monthly, not seasonally adjusted

CPI inflation is what Canada uses to gauge levels of inflation and see how affordability changes over time. The graph shows, apart from energy and transportation, that the regular trend since December 2019 has been upward. The Bank of Canada aims to keep inflation in the range of 1-3% per year. Since the outbreak of covid, the price of goods is rising faster than the Bank of Canada would like. In the column for all items, CPI is estimated to have increased 4.55% since the start of covid, and is trending even higher, with a 4.1% year over year change (Aug 2020-Aug 2021). 

This alarmingly high trend has the power of long-lasting effects on the economy. If wages don’t rise at the same pace as inflation, people will begin to find themselves with less and less left over at the end of the month. Another important factor to consider alongside inflation is the value of savings or retirement plans. Inflation inherently devalues currency, and unless you are investing in assets that can match the pace of inflation, the real value of your dollar will decrease over time. This is a serious problem for people living on a fixed income budget that does not change along with inflation.

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