No Evidence Retailers and Grocers Have Inflated Prices, Says Bank of Canada

Produce is shown in a grocery store in Toronto on Nov. 30, 2018. (Nathan Denette/The Canadian Press)

Despite accusations of price gouging from some parliamentarians, there is no evidence that retailers, grocers, and wholesalers have increased their prices to take advantage of inflated supply-chain costs, says the Bank of Canada.

“The cumulative growth of markups of consumer-oriented firms was close to zero between 2020 and 2022,” wrote the Bank of Canada (BoC) in a recent report, titled “Markups And Inflation During The Covid-19 Pandemic,” as first reported by Blacklock’s Reporter on June 20.

The central bank added that any price increases have been “consistent with complete pass-through of the various shocks to costs experienced along the supply chain in recent years.”

“At the firm level, inflation is the product of the growth in markups and growth in marginal costs,” the BoC wrote.

Most price spikes in products being sold by retailers and grocers are due to the increased costs of “global freight and energy,” along with other supply-chain necessities, said the BoC.

The central bank added that costs associated with labour and commercial services such as trucking and shipping have also risen “significantly” in recent years.

“Faced with large and pervasive cost increases, firms appear to have been able to pass them on to consumers,” wrote the BoC.

NDP Leader Jagmeet Singh has accused the CEOs of Canada’s large grocery chains of increasing their prices and profit margins under the guise of inflationary pressures.

Singh has called it “greedflation” and has called on the federal government to introduce a new tax on “excess profits.”

Inflated Prices

A House of Commons committee also recently recommended on June 13 that Ottawa introduce a similar “windfall profits tax on large, price-setting corporations to disincentivize excess hikes in their profit margins for these items” if the federal Competition Bureau finds evidence that “large grocery chains are generating excess profits on food items.”

Both Loblaw president Galen Weston and Empire CEO Michael Medline have denied taking advantage of inflation to raise their companies’ profit margins.

“If we didn’t raise retail prices, as costs went up … the companies that we operate would disappear almost instantly,” Weston told the Commons Standing Committee on Agriculture on March 8.

Further, Parliamentary Budget Officer Yves Giroux came to conclusions similar to that of the Bank of Canada in his own previous assessment of inflated retail prices.

Giroux was asked by Senators while appearing before the Senate Standing Committee on Banking in September 2022 whether there was any truth to the idea of “inflation from crooks who have taken advantage of it to raise their prices.”

“It certainly can feel that way, usually when, as a consumer, you’re faced with prices that seem to increase without reason in some cases,” Giroux said, while adding that price increases are due to a “supply and demand phenomenon.”

“It’s hard to accuse everyone who is raising their prices of taking advantage of the situation, even though it may look like that. It’s hard to make those accusations, generally, without looking at a particular industry or a particular business.”