Grocery bills in Canada climbed sharply through 2025 after cost pressures that began late in 2024 moved through supply chains, according to a Bank of Canada report. The central bank found these inflationary forces to be "more limited, narrower in scope and more commonly tied to imported items" than the broad-based shocks witnessed during the pandemic era.
The data show a clear divergence between food and other consumer goods. Grocery prices have risen roughly 22% since 2022, while other consumer goods have increased about 13% on average. By December 2025, headline food inflation stood at 5%, the most pronounced rate since late 2023, creating renewed strain on household budgets.
To track how upstream cost movements affect retail prices, the Bank applied a framework that splits production costs into eight distinct categories. The report highlights the delayed transmission of these pressures to consumers, noting that "food inflation is closely tied to cost pressures, but with a lag," typically taking between six and nine months for changes in the supply chain to be reflected at the checkout.
Most of the 2025 increase was linked to higher prices for direct imports - examples cited include olive oil and processed goods - a dynamic that was worsened by a weakening Canadian dollar. Some food segments displayed sharp volatility: coffee prices rose 31% and confectionery prices climbed 14%, movements the report attributes to supply shortages and international trade tariffs.
On the domestic side, cost pressures were concentrated in live animals and intermediate products. These pressures were often intensified by persistent drought conditions. Retail beef prices were a notable example of domestic-driven inflation - in December 2025 retail prices for beef were 17% higher than in December 2024. Those increases were partially offset by somewhat cooler labor costs in wholesale operations.
The Bank also emphasized the unequal burden of rising grocery costs. Lower-income households are hit harder because they spend a larger portion of their disposable income on food. While the report observes that import-related pressures eased in the latter half of 2025, it cautions that domestic factors continue to play an important role in determining final retail prices, and that policymakers remain watchful.
Implications for markets and the economy
The Bank of Canada analysis ties the 2025 food inflation episode to a mix of imported cost shocks and domestic supply issues. The findings point to continued sensitivity in agriculture, grocery retail, and wholesale sectors, along with household consumption patterns that vary by income.