Cost of living in Canada: What will cost more, less in 2023
There was no shortage of economic uncertainty over the last year.
Russia’s invasion of Ukraine disrupted global fuel supplies and caused gas prices to reach record levels. The Bank of Canada’s aggressive interest rate hikes reinforced recession fears for Canadian consumers. And inflation remained an underlying theme of concern.
As Canadians worry about affording the costs of feeding their families, living under a roof and driving their vehicles, they look toward a new year, hoping for financial relief.
Here’s a look at what things will cost in 2023.
Despite lower gas prices offering much-needed relief during the holidays, Canadian pump costs soared to record heights in 2022. One industry analyst predicts the cost of gas will rise yet again in the new year.
Dan McTeague, the president of Canadians for Affordable Energy, told CP24.com Canadians could see the average price of a litre of gasoline jump to $2 again.
“Count on it,” he said.
McTeague said that the relief at gas stations in recent weeks will be short-lived, warning that gas prices will begin rising later in January – with $2 a litre becoming an average price in Ontario and other provinces.
“We had a pretty good (run) in December,” he said. “The world got very nervous about rising interest rates, demand destruction, and COVID lockdowns in China. And all those played very heavily towards keeping prices in check and pushing them down,” McTeague said
“Colder weather is going to put pressure on diesel, and natural gas, which in turn will put pressure on oil and ultimately on gasoline prices. And that could start to emerge by the second or third week of January,” he added.
He said that, by the end of April, prices could be back to just under $2 a litre, with factors such as the federal carbon tax increasing that month.
According to data from Statistics Canada, the average price for regular fuel in Canada was $1.31 a litre this time last year, when driving trends were much lower as Canadians wrestled with the spread of Omicron.
As demand increases, experts say supply limits will cause prices to keep rising.
Food prices in Canada also likely won’t see much improvement. According to the latest Food Price report from Dalhousie University, grocery costs are projected to soar up to seven per cent more in 2023.
The report anticipates that a family of four will have an annual food expenditure of up to $16,288.41, “an increase of up to $1,065.60 over the total annual cost [in 2022.]”
“We were hoping to have better news for Canadians, given the difficulties experienced in 2022, but our models tell us a different story,” the report said.
It noted the war in Ukraine plays a large role in rising food costs — a result of disruptions in three major commodities: wheat, sunflower oil, and fertilizers. The last of those plays a large role in lower crop production on Canadian soil, driving an estimated increase of six to eight per cent in costs this year.
The report explained that limits in wheat and sunflower oil also largely contribute to supply failing to meet demand, which will continue to be a problem as Western sanctions block Russian exports.
There is some good news for Canadians, however, and it’s in housing affordability, as experts anticipate a continued correction trend, which has been sustained since the summer of 2022.
“Sales and prices are contracting particularly sharply in Ontario and British Columbia,” an August economic viewpoint report by Desjardins noted.
“At the national level, we expect a roughly 23 per cent decline in the average home price between February 2022 and December 2023,” it said. “And despite the accelerated pace of decline, we remain of the view that home prices will end 2023 above their pre-pandemic levels nationally and in each province.”
According to a TD Bank report, the average price of a home in Canada could drop between 20 and 25 per cent from in the first quarter of 2023.
Data revealed by the Canadian Real Estate Association (CREA) showed average prices reached $629,971 in July, which is a five per cent fall from $662,924 the previous year. This amounted to a three-per-cent drop from June.
As TD economist Rishi Sondhi wrote in the report, “The price drop represents an unprecedented decline at least going as far back as the late 1980s, when the data began, but it follows an equally unprecedented rise during the pandemic.”
He added that the forecast “can be more aptly described as a recalibration of the market, instead of something more severe.”
With files by CP24.com