From food to haircuts, prices seem to be rising everywhere. A key concern for investors is whether this pandemic-induced inflation will be transitory, as economic growth reverts to pre-pandemic levels, or will persist over the longer term.
The Consumer Price Index (CPI) in Canada has exceeded 3% since April 2021 and reached 4.1% in August 2021 – the largest year-over-year increase in almost two decades. The U.S. has set a similar record with the CPI reaching 5.4% in August 2021 – having exceeded 5% since May 2021. Although the large year-over-year increases are partially due to low inflation numbers at the onset of the pandemic (known as the “Base Effect”), the total CPI in Canada has now reached the same point had there been constant 2% inflation since the start of the pandemic.