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Canada Food Prices Likely to Remain Above Headline Inflation, RBC Says

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Canadian grocery prices are likely to continue rising faster than headline inflation in the near term, as persistent supply-chain pressures, elevated meat prices and a weaker currency keep costs elevated, RBC Economics said in a Wednesday note.

Relief remains limited, particularly amid ongoing Middle East tensions and evolving trade policies with the US, said the bank.

"Our outlook has grocery inflation moderating closer to headline inflation next year, but this hinges on assumptions that key input prices like oil trend lower, there are no major trade-related supply chain disruptions, and existing industry-specific supply challenges continue to ease," wrote RBC Economist Salim Zanzana in the note.

Meat prices should stay elevated amid tight cattle numbers, while elevated processing, labor, packaging, wholesale, retail and transport costs account for up to 90% of consumers' food costs, Zanzana added.

Longer term, climate disruptions, protectionism and unintended policy costs remain key upside risks, with a tariff war with the US raising food import costs and extreme weather threatening yields and supply, said RBC.

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