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What Parts of the Canadian Economy Are the Most (And Least) Impacted by Inflation? Thumbnail

What Parts of the Canadian Economy Are the Most (And Least) Impacted by Inflation?

People around the world have been hit hard by inflation, and increasing costs have impacted nearly all sectors of the economy. Here, we look at what parts of the Canadian economy have been the most impacted by inflation.


The sale of crude oil is a huge part of the Canadian economy. In fact, the oil and gas sector is the most profitable by far, with a $38-billion increase in profits in December 2022. Although this sector remains extremely profitable, it is still impacted by inflation because, as inflation increases, so does the price of oil. The consumer price of oil has been one of eight sectors that has risen the fastest since pre-pandemic levels.1

Real Estate

Recently, we have seen the Canadian housing market cool a little, but housing prices continue to rise throughout the country. According to the New York Times, prices for single-family homes in Toronto fell by 16.4% between February and the end of August but were still 7.7% higher than in the same month last year. In addition, house prices in Canada's 11 major cities rose by 15.16% year-over-year in November 2021 (10% when adjusted for inflation).2,3

These increases show that despite efforts to minimize inflation, including interest rate hikes, this sector is still impacted by inflation.


Although inflation rates aren't as aggressive as they were earlier this year, transportation costs continue to rise. The price of gasoline has risen by more than a third in the past 12 months. In addition, many consumers who are looking to buy a new or used car will likely still have sticker shock because of lingering supply chain issues, which continue to drive up the price of cars. According to AutoTrader, the average price of a new vehicle in August 2022 was $56,078, an increase of 18.3% over the same period last year. The average used vehicle price in August 2022 was $37,768, an increase of 28.6% year over year.4,5


Shelter is a category that combines both real estate and energy, but it's important to look at it as a standalone sector because the rise in shelter costs impacts all Canadians. The cost of shelter includes things like rent or mortgage payments, electricity costs, natural gas costs, and fuel oil costs. According to TD Economics, shelter costs have been among the largest contributors to year/year growth in Canada's inflation rate.6

There are a few reasons why shelter has been hit so hard by inflation. One is that resale markets are tight, with the sales-to-listings ratio elevated. With new home prices previously surging, homeowners' replacement costs have spiked by more than 10% across the country. In addition, rent inflation is high throughout most provinces.

Another reason is that heating fuel accounts for a larger share of utility spending. Utility spending is categorized as shelter, so with inflation, it is more expensive to maintain a home than it was a few years ago.

So what about sectors of the Canadian economy that are the least impacted by inflation? Most sectors are impacted to some degree, but according to a chart released by the Bank of Canada, services (excluding shelter) remain one of the sectors least impacted by inflation. Inflation in goods excluding food and energy rose to about 3.5% by July 2021, while inflation in services excluding shelter was only around 1%.7,8

Our economy continues to change every day, so it will be interesting to see which sectors are the most impacted by inflation as we head into 2023.

  1. https://globalnews.ca/news/9320493/canada-oil-and-gas-profits-inflation/
  2. https://www.nytimes.com/2022/10/08/world/canada/canada-real-estate-market.html
  3. https://www.globalpropertyguide.com/North-America/Canada/Price-History
  4. https://www.cbc.ca/news/business/inflation-rate-june-1.6120541
  5. https://toronto.ctvnews.ca/used-car-prices-in-canada-have-peaked-while-new-car-prices-continue-to-rise-1.6070540
  6. https://economics.td.com/ca-regional-inflation
  7. https://www.bankofcanada.ca/wp-content/uploads/2022/10/remarks-2022-10-06.pdf#chart1
  8. https://www.bankofcanada.ca/2022/10/whats-happening-to-inflation-and-why-it-matters/

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