I missed that on Friday our friends at Stats Canada posted the CPI numbers (Inflation) for August and year over year prices rose a small 1.1% which is better news, given the July numbers showed a 1.3% CPI increase (year over year).

A telling area to watch is transportation which includes a few key components:

Transportation costs rose 1.3% in the 12 months to August, following a 2.7% advance in July. On a year-over-year basis, consumers paid 2.2% more for gasoline in August, after paying 6.1% more in July. In addition, prices for the purchase of passenger vehicles increased 0.6% in the 12 months to August, a smaller rise than in July (+2.0%).

Gasoline prices have dropped lately but have been higher in Ottawa (was at $1.31 a liter and now they are down to $1.23 a liter) . The pendulum of gasoline prices does seem to be messing around with the overall numbers (I am sure next month we will see a drop in gas prices, which will bring the CPI down (maybe?)).

Numbers Don’t Lie Inflation Over The Past 5 Years

The other issue is that while Gasoline yo yos up and down, other things like food just keep going up, at least that is my point of view whilst doing the family groceries.

Bank of Canada’s core index

As usual we need to look at what the Bank of Canada thinks inflation is running at, since they will be the ones to eventually decide whether the economy needs to slow down (i.e. when do interest rates kick back in to slow everything down):

The Bank of Canada’s core index rose 1.3% in the 12 months to August, following a 1.4% increase in July.

On a monthly basis, the seasonally adjusted core index posted no change in August, after rising 0.1% in the previous month.

Again, nothing obvious to cause the Bank of Canada folks to feel that anything is over-heating, but they may raise interest rates to just to remove the stimulus in the economy? Yes, I realize I do say that every month, but like the weather man, I will be right one day.

More Information

Stats Canada also publishes even more interesting information that is worth having a look at, so this month let’s bring up the Big Table on prices seasonally adjusted:

Consumer Price Index and major components - Seasonally adjusted1

June 2013

July 2013

August 2013

June to July 2013

July to August 2013

(2002=100)

% change

All-items Consumer Price Index (CPI)

122.8

122.9

123.0

0.1

0.1

Food

132.2

132.1

132.6

-0.1

0.4

Shelter

128.5

128.8

128.8

0.2

0.0

Household operations, furnishings and equipment

114.2

114.6

114.4

0.4

-0.2

Clothing and footwear

92.8

92.9

93.1

0.1

0.2

Transportation

129.4

129.4

129.5

0.0

0.1

Health and personal care

118.2

118.2

118.2

0.0

0.0

Recreation, education and reading

106.0

106.3

106.6

0.3

0.3

Alcoholic beverages and tobacco products

140.9

140.5

140.4

-0.3

-0.1

Special aggregates
Core CPI2

121.1

121.2

121.2

0.1

0.0

All-items CPI excluding food and energy3

117.2

117.3

117.3

0.1

0.0

1. A seasonally adjusted series is one from which seasonal movements have been eliminated. Each month, the previous month’s seasonally adjusted index is subject to revision. On an annual basis, the seasonally adjusted values for the last three years are revised with the January data release. Users employing CPI data for indexation purposes are advised to use the unadjusted indexes. For more information on the availability and uses of seasonally adjusted CPI data, please see the Definitions, data sources and methods section of survey 2301 (www.statcan.gc.ca/imdb-bmdi/2301-eng.htm).

2. The Bank of Canada’s core index excludes eight of the CPI’s most volatile components (fruit, fruit preparations and nuts; vegetables and vegetable preparations; mortgage interest cost; natural gas; fuel oil and other fuels; gasoline; inter-city transportation; and tobacco products and smokers’ supplies) as well as the effects of changes in indirect taxes on the remaining components. For additional information on the core CPI, please consult the Bank of Canada website (www.bankofcanada.ca/rates/indicators/key-variables/inflation-control-target/).

3. The special aggregate “Energy” includes: electricity; natural gas; fuel oil and other fuels; gasoline; and fuel, parts and supplies for recreational vehicles.

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