Inflation rises faster than expected in January as restaurant menu prices go up

January consumer prices up 1.7% year-over-year as Ontario's minimum wage hike pushes menu prices higher in Central Canada

The B.C. restaurant industry will likely raise menu prices as the minimum wage goes up

Canada’s inflation rate rose 1.7% year-over-year in January, accelerating faster than economists’ consensus forecast of 1.5%.

Upward food and restaurant costs boosted the gains, with menu prices posting their second-largest monthly increase in 27 years, according to BMO senior economist Robert Kavcic.

“If you were to think that was the result of Ontario’s minimum wage [hike], you’d be correct. Indeed, Ontario restaurant prices jumped 1.9% in the month … by far the most in Canada, and an entirely predictable response,” he said in a note to investors.

While Ontario grapples with its own minimum wage issues, B.C. restaurants are debating what to do about impending wage increases coming to the West Coast.

The government announced earlier this month it would gradually hike the minimum wage beginning this June until it reached $15.20 by 2021.

“I don’t think there’s any way to avoid some price increases because there’s just not enough margin in restaurants to handle that,” Ian Tostenson, president and CEO of the B.C. Restaurant and Foodservices Association, told Business in Vancouver on Roundhouse 98.3.

“He’s [B.C. Premier John Horgan] going there a bit faster than we would have wanted as an industry and he’s front-end loading it,” he said.

B.C.’s current minimum wage in scheduled to go up by about 11% in June, rising from $11.35 an hour to $12.65 an hour.

“When you put up [wages] like this, most restaurants will lose money if they don’t do anything,” Tostenson said.

Leaders from Glowbal Restaurant Group, Fatburger Canada and A&W Food Services Canada Inc. told BIV they were considering increasing prices on menus to help adjust to increasing labour costs.

While January’s inflation numbers were more tempered compared with December’s 1.9% year-over-year gain, TD senior economist James Marple said the latest numbers suggest strong economic growth has been successful at pushing inflation closer to the Bank of Canada’s 2% target.

“The Bank of Canada may look through the one-time impact of higher minimum wages, but it cannot ignore the broader evidence of price pressures that are becoming apparent,” he said in a note to investor.


—With a file from Glen Korstrom