In its latest consumer price index released Tuesday, Statistics Canada declared Canadians saw grocery prices soar precipitously last month over one year. Grocery prices rose 9.8%, marking the fastest pace since 1981.
Rising energy prices also contributed significantly to high inflation last year, as consumers paid 28.5% more for gasoline in 2022 annually. But Canadians spent 13.1% less at the pumps than in November, according to the federal agency, with crude prices dropping as concerns of a global recession near.
The Bank of Canada says it will look at this report to influence its next interest rate decision on January 25 and will also look at its preferred inflation measures. Though energy prices have driven much of the high inflation, the Canadian economy saw a broadening of inflation pressures in 2022.
The country's annual inflation rate peaked last summer at 8.1% and slowly fell to 6.8% in November, garnering some optimism despite a looming global recession. The average inflation rate in 2022 topped a four-decade high at 6.8% and doubled from the previous year.
"While the direction of inflation is at least mildly encouraging, there's nothing in this report to keep the Bank of Canada from hiking rates another 25 (basis points) at next week's policy meeting," said BMO managing director Benjamin Reitzes.
Adversely, prices for everything, excluding food and energy, rose 5.3% in December annually. Residents have observed increases in mortgage interest costs, clothing and footwear, and personal care supplies and equipment, which offset December's slowdown.
Statistics Canada said prices for durable goods were up 6.2%, while prices for services rose 5%.
A new business outlook poll by the Bank of Canada found that despite more jobs, two-thirds of businesses predict a recession, citing weak growth and high-interest rates that detracts investment.
"Rising interest rates are dampening firms' sales expectations and plans to invest," wrote the Bank of Canada.
"Firms also link their weaker outlook on demand to high inflation eroding consumers' spending power and the possibility of a recession. More businesses than usual expect their sales to decline."
The report comes as the World Economic Forum (WEF) meets with global leaders in Davos, Switzerland, for their annual gathering. Chief economists attending the WEF summit also predict a global recession this year, with two-thirds of economists surveyed believing it is likely.
"The current high inflation, low growth, high debt and high fragmentation environment reduces incentives for the investments needed to get back to growth and raise living standards for the world's most vulnerable," says the WEF.