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When market players look at inflation, they tend to ponder what it means for consumer spending and monetary policy.

Unions, on the other hand, look at how it hits your pocketbook. And on that score, it's not looking good.

Annual inflation in Canada picked up in June to 2.4 per cent, according to the latest reading from Statistics Canada. Driven by higher food, shelter and transportation costs, that's the fastest pace in 28 months, and up from May's 2.3 per cent.

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The Bank of Canada believes the recent hot nature of inflation is temporary, and economists don't believe Friday's reading will change the course of the central bank.

Another way of looking at it, of course, is that the cost of living in Canada is outstripping our pay increases.

So, just as an example, the cost of meat is up by 9.4 per cent from a year ago. Prices for fresh vegetables are up 9.5 per cent. The cost of a car is up 1.6 per cent, and clothing and shoe prices are up 1.6 per cent. And prices at the gas pump, which most of us feel, are up 5.4 per cent.

But the change in hourly wages across the country is up just 1.9 per cent in the same period, according to Statistics Canada. While it's higher for union members, at 2.2 per cent, it still lags the annual rate of inflation.

Which is why Erin Weir, the economist at the United Steelworkers, is sounding alarm bells.

"One would hope that, as our economy grows, people would need to devote less of their incomes to basic necessities," Mr. Weir said.

"But over the past year, rising food and shelter prices outstripped average wage increase."

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The cross-Canada outlook varies, of course. So, Mr. Weir pointed out, you're going to feel it in Ontario, where inflation is now at 3 per cent, but wage growth at just 0.7 per cent.

Compare that to Alberta, however, where inflation is at 1.9 per cent, and pay increases at 1.8 per cent. And in the 25-to-54 age bracket in Alberta, pay gains are at 2.5 per cent.

While the Bank of Canada believes many of the things fuelling inflation are transitory, it noted this week that wage increases are "subdued."

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About the Author
Report on Business News Editor

Michael Babad is a Report on Business editor and co-author of three business books. He has been with Report on Business for several years, and has also been a reporter and editor at The Toronto Star, The Financial Post and United Press International. His articles have appeared in major newspapers around the world. More


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