Gas Prices Drive Down Inflation in December to 1.5%

As I assumed the inflation numbers for the end of the year have gone completely squirrely™ (my new term for numbers manipulated to create a false sense of security) thanks to plummeting gas prices. Given gas is almost 1/2 price compared to 2 years ago, which is nuts, but I just keep feeling this whole thing is a manipulation, but that remains to be seen.

Inflation was around 2.4% (year over year) just a short while ago, now it is at 1.5%, and there is a real chance of it dropping further, if gas prices continue to drop (although I note Diesel fuel prices are not dropping that fast, so the trucking industry or farmers are not basking in the joys of the current low gas prices).

How squirrely are these numbers?

The Consumer Price Index (CPI) rose 1.5% in the 12 months to December, following a 2.0% increase in November.

That is a 25% drop in one month for the year over year inflation numbers, pretty big, but what does it really mean?

CPI Past Little While

The 12-month change in the Consumer Price Index (CPI) and the CPI excluding gasoline

You can see without the gasoline, inflation continues to run above 2.0%, which is worrying, isn’t it? I bet you are asking just how much did Gas drop these past 12 months?

On a monthly basis and before seasonal adjustment, the gasoline price index fell 9.8% in December. Between June and December 2014, gasoline prices decreased 24.6%. In comparison, prices for gasoline declined 42.7% between June and December 2008.

Gas prices for past little while

Gasoline prices continue to fall in December

That is a bloody big drop. The graph shows how big a drop it was:

How does this all look in the big basket? This is the measure of the actual price over time.

Seasonally adjusted CPI

Seasonally adjusted monthly Consumer Price Index

Bank of Canada’s core index

Remember the Bank of Canada has their own way of measuring things, and they seem to not be taking gas into the equation (as much):

The Bank of Canada’s core index rose 2.2% in the 12 months to December, after increasing 2.1% in November.

Interesting that they lowered interest rates even with Inflation at 2.1%?

The Big Table

Let’s have a look at one of the big tables to see what has gone up in price

Consumer Price Index, major components and special aggregates, Canada – Not seasonally adjusted

Relative import1 December
2013
November
2014
December
2014
Nov to Dec 2014 Dec 2013 to Dec 2014
% (2002=100) % change
All-items Consumer Price Index (CPI) 100.002 122.7 125.4 124.5 -0.7 1.5
Food 16.60 132.5 136.9 137.4 0.4 3.7
Shelter 26.26 129.9 132.8 133.0 0.2 2.4
Household operations, furnishings and equipment 12.66 114.7 118.2 117.8 -0.3 2.7
Clothing and footwear 5.82 89.4 94.7 91.1 -3.8 1.9
Transportation 19.98 128.5 127.7 124.9 -2.2 -2.8
Health and personal care 4.93 118.1 119.9 119.6 -0.3 1.3
Recreation, education and reading 10.96 105.3 106.8 106.1 -0.7 0.8
Alcoholic beverages and tobacco products 2.79 141.2 149.4 149.1 -0.2 5.6
Special aggregates
Core CPI3 84.91 121.0 124.1 123.7 -0.3 2.2
All-items CPI excluding energy 91.44 119.9 122.9 122.5 -0.3 2.2
Energy4 8.56 158.9 156.5 148.7 -5.0 -6.4
Gasoline 4.62 179.7 166.2 149.9 -9.8 -16.6
All-items CPI excluding food and energy 74.85 117.1 119.8 119.3 -0.4 1.9
Goods 48.18 113.8 116.2 114.6 -1.4 0.7
Services 51.82 131.7 134.5 134.5 0.0 2.1

1.2011 CPI basket weights at January 2013 prices, Canada, effective February 2013.

2.Figures may not add up to 100% as a result of rounding.

3.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, consult the Bank of Canada’s website.

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

Source(s):

CANSIM tables 326-0020 and 326-0031.

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Low Gas Prices puts Inflation at 2.0% In November

Our friends at Stats Canada told us what we kind of already knew, that lower gas prices in November lowered inflation to 2.0% (year over year).

If we look at the graph of Inflation for the past little while, it is really a saw-tooth of ups and downs (but luckily all of this happening around 2.0% as the median):

Inflation Canada

Inflation for the past 5 years

How wild has gas prices been lately? Luckily Stats Canada also included this helpful graph to show us just how crazy things are right now.

Gas Price Index

Gas Price Index

Mid-year we are setting new records and now we are well below $1 a litre (in Ontario at least). Does this mean things are just “peachy keen”? Not, really, that inflation is at 2.0% with gas dropping that much suggests other essentials are going up at a higher rate.

To quote our friends at Stats Canada:

The shelter index rose 2.3% in the 12 months to November, following a 2.8% gain in October. Natural gas prices increased 14.7% on a year-over-year basis in November, after recording a 20.1% rise the previous month. As well, electricity prices were up 3.6% year over year in November, following a 5.6% increase in October.

Food prices advanced 3.1% on a year-over-year basis in November. Prices for food purchased from stores were up 3.3% in the 12 months to November, led by a 12.2% rise in meat prices. Food purchased from restaurants cost 2.5% more in November compared with the same month in 2013.

Holy cow! Meat prices are up over 12%?!? Meat did seem more expensive in my visits to the grocery stores.

Bank of Canada’s core index

Remember that the Bank of Canada measures CPI in a bit different way, and that is what they use in terms of figuring out whether to slow the economy down. Luckily we are still in the “sweet spot” for the Bank of Canada, so we are less likely to see interest rates going up (for this reason at least).

The Bank of Canada’s core index rose 2.1% in the 12 months to November, after increasing 2.3% in October.

The seasonally adjusted core index posted no change on a monthly basis in November, following a 0.2% increase in October.

What is the CPI?

This month I won’t include any of the big tables, as we have already discussed the major category increases, but Stats Canada has published on their YouTube channel a helpful video explaining, just what is the CPI, have a look.

Inflation over 2014 so far

Reports on inflation from:  January , February , March , April , May , JuneAugust , September , October

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Inflation Stays High Despite Lower Gas in October

Our friends at Stats Canada published their monthly report on the Consumer Price Index, and the numbers are not what I was guessing it might be (in that it is still inching up in the Bank of Canada Red Zone).

To quote the report precisely:

Higher prices for shelter and food led the rise in the CPI. At the same time, larger year-over-year price increases for transportation and for clothing and footwear contributed the most to the acceleration in the CPI.

So, day-to-day living costs of shelter and food are up last month and thanks to transportation continues to drag the year over year number up? Lovely.

CPI For Past Little WHile

The 12-month change in the Consumer Price Index, from October 2009 to October 2014

To be more clear about the shelter increase year over year, Stats Canada pointed out:

Shelter costs rose 2.8% in the 12 months to October, led by a 20.1% gain in natural gas prices. Consumers also paid more for electricity, homeowners’ home and mortgage insurance as well as rent in October compared with the same month in 2013. Property taxes rose 2.2% on a year-over-year basis, while mortgage interest cost declined 0.2%.

That is wild that mortgage rates actually lowered the cost of shelter over the year? Wow. The Natural Gas and Electricity increase makes me shake my head. Here in Ontario the Electricity cash grab was mostly due to bad management and government interference, and the Natural Gas is mostly due to artificially created shortages by mismanagement on the part of the Natural Gas suppliers (see a repeating theme here).

While I am confident there are those saying, “Why worry CPI is at 2.5% and my income is growing faster than that“, and you may be correct, but that is assuming these stats reflect the actual world (I always view them as a “it increased at least this much” point of view, I suspect prices actually went up higher, but how the data is manipulated makes it more optimistic). If inflation runs at 2.5% and you get a 3.2% raise and your investment grow at 3.0%, yes you are ahead but only by 0.7% in terms of income and 0.5% in terms of savings.

 

CPI for past little while

Seasonally adjusted monthly Consumer Price Index, from October 2009 to October 2014

Bank of Canada’s core index

The Bank of Canada’s core index rose 2.3% in the 12 months to October, after increasing 2.1% in September.

The seasonally adjusted core index increased 0.2% on a monthly basis in October, matching the gains in September and August.

This is important because this is the Red Zone for Bank of Canada in terms of interest rates, so we have best watch out if this creeps up a little more, we may see an easing of lower interest rates (to use banker baffle gab speak).

The Big CPI Data Table

This month’s big table is the seasonally adjusted numbers, not sure how this adjustment works, but have a look and see if you can figure it  out.

Consumer Price Index, major components and special aggregates – Seasonally adjusted

August
2014
September
2014
October
2014
August to
Sept 2014
Sept to
Oct 2014
(2002=100) % change
All-items Consumer Price Index (CPI) 125.6 125.8 125.9 0.2 0.1
Food 135.4 136.3 136.4 0.7 0.1
Shelter 132.4 132.5 132.8 0.1 0.2
Household operations,
furnishings and equipment
117.8 117.5 117.8 -0.3 0.3
Clothing and footwear 93.2 93.8 94.1 0.6 0.3
Transportation 131.2 130.5 130.9 -0.5 0.3
Health and personal care 119.2 119.2 119.1 0.0 -0.1
Recreation, education and reading 107.8 107.9 108.1 0.1 0.2
Alcoholic beverages and
tobacco products
148.4 148.5 149.2 0.1 0.5
Special aggregates
Core CPI 123.6 123.8 124.1 0.2 0.2
All-items CPI excluding
food and energy
119.5 119.6 119.8 0.1 0.2

 

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Inflation at 2.1 for August in Canada

Inflation in Canada Steady at 2.1%

Stats Canada on Friday announced the monthly and yearly Consumer Price Index (aka Inflation) numbers for August, and overall you think it’s not really that bad as the CPI is running at 2.1% (12 months previous to August 2013) which matches the same  year over year number for July, but, should we be celebrating? As usual with these numbers the devil is in the details.

Inflation over Past Year

The 12-month change in the Canadian Consumer Price Index

Even that graph starts to make you think that things are just fine, but again, you need to peel the onion to truly appreciate the horrible smell underneath (not to give onions a bad name). The first layer of the onion would tell you this:

Shelter costs rose 2.8% in August compared with the same month a year earlier. This increase followed a 3.0% gain in July. Natural gas prices increased 17.9% on a year-over-year basis in August, after rising 20.4% the previous month. Consumers also paid more for homeowners’ home and mortgage insurance.

Natural Gas prices up almost 18% year over year? Holy crap! That is how I heat my house, and heat my water, and now it costs a hell of a lot more than last year? More for Home and Mortgage Insurance, as well is no surprise, but I hope it is not a price gouge attempt (like the Natural Gas industry is enjoying).

The household operations, furnishings and equipment index rose 3.0% on a year-over-year basis in August, led by a 7.6% increase in the cost of telephone services. In addition, the cost of Internet access services rose in the 12 months to August.

Telephone costs are rising as well as Internet access prices are rising? No big surprise there given the monopolies in Canada (no mention of Cable TV costs, wonder where those line up on the list).

Bank of Canada’s core index

This is the one that the Bank of Canada looks at closely when it decides nasty things like whether interest rates should go up or not.

The Bank of Canada’s core index advanced 2.1% in the 12 months to August, after increasing 1.7% in July.

On a year-over-year basis, prices for some of the components included in the core index, such as telephone services and the purchase of passenger vehicles, increased more in August than in July. Movements in these indexes have a larger impact on the core index than on the All-items CPI because certain components are excluded from the core index.

At the same time, prices for gasoline, fresh fruit, fresh vegetables and natural gas, which are excluded from the core index, decelerated on a year-over-year basis in August.

That last line in bold is quite interesting, isn’t it? the Bank of Canada doesn’t count Gasoline, Fresh Fruit and vegetables or Natural Gas in their Index? Interesting.

Prices Big Table

One of my favorite of the big tables in the report is the one that goes by component (seasonally adjusted):

Consumer Price Index and major components – Seasonally adjusted1

June 2014 July 2014 August 2014 June to
July 2014
July to
August 2014
(2002=100) % change
All-items Consumer Price Index
(CPI)
125.6 125.5 125.6 -0.1 0.1
Food 136.0 135.8 135.5 -0.1 -0.2
Shelter 132.2 132.6 132.4 0.3 -0.2
Household operations, furnishings
and equipment
116.3 116.3 117.8 0.0 1.3
Clothing and footwear 93.5 93.5 93.1 0.0 -0.4
Transportation 132.2 131.4 131.3 -0.6 -0.1
Health and personal care 118.8 119.1 119.2 0.3 0.1
Recreation, education and reading 107.5 107.5 107.8 0.0 0.3
Alcoholic beverages and tobacco products 146.7 147.1 148.4 0.3 0.9
Special aggregates
Core CPI2 123.2 123.3 123.6 0.1 0.2
All-items CPI excluding food and energy3 119.1 119.2 119.6 0.1 0.3
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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Inflation Stays up in June in Canada

The good news is  that on Wednesday last week the Bank of Canada kept their key over night rate at 1.0% for now, however on Friday Stats Canada confirmed what we all already knew, inflation continues at its torrid pace in June, specifically:

The Consumer Price Index (CPI) rose 2.4% in the 12 months to June, following a 2.3% increase in May.

Remember that over 2.0% starts the Bank of Canada taking notice of Inflation. The graph for Inflation does not look very good, as you can see:

Inflation in Canada

Inflation over the past little while in Canada

Quite the spike going on, what caused this jump? A very good graph in the report shows where it is hurting the most.

Inflation in Canada

Where the Inflation Came From, by category

Note tobacco and booze is up big time, just in time for the summer.

Bank of Canada’s core index

Remember that the Bank of Canada is the worry point, in that they might raise interest rates to “cool down” inflation. I guess the good news here is that the Bank of Canada’s measures seem to say our inflation isn’t bad (yet).

The Bank of Canada’s core index rose 1.8% in the 12 months to June, after increasing 1.7% in May.

The seasonally adjusted core index rose 0.2% on a monthly basis in June, matching the increase in May.

Note this helpful graphic from the Bank of Canada and how they notice inflation.

Inflation-Control Target

Inflation-Control Target

Operational Guide

Operational Guide

The Big Table

For those who aren’t sure, let me show you where the big increases are in a big table!

Consumer Price Index and major components, Canada – Not seasonally adjusted

Rel import1 June 2013 May 2014 June 2014 May to June 2014 June 2013 to June 2014
% (2002=100) % change
All-items Consumer Price Index (CPI) 100.002 123.0 125.8 125.9 0.1 2.4
Food 16.60 132.5 135.7 136.4 0.5 2.9
Shelter 26.26 128.5 132.6 132.2 -0.3 2.9
Household operations, furnishings and equipment 12.66 114.2 115.8 116.4 0.5 1.9
Clothing and footwear 5.82 91.2 94.5 92.7 -1.9 1.6
Transportation 19.98 130.2 132.7 133.1 0.3 2.2
Health and personal care 4.93 118.4 119.2 119.0 -0.2 0.5
Recreation, education and reading 10.96 106.6 107.8 108.2 0.4 1.5
Alcoholic beverages and tobacco products 2.79 140.9 146.2 146.7 0.3 4.1
Special aggregates
Core CPI3 84.91 121.0 123.3 123.2 -0.1 1.8
All-items CPI excluding energy 91.44 119.9 122.1 122.2 0.1 1.9
Energy4 8.56 162.1 172.7 173.0 0.2 6.7
Gasoline 4.62 188.5 194.8 198.7 2.0 5.4
All-items CPI excluding food and energy 74.85 117.2 119.1 119.1 0.0 1.6
Goods 48.18 114.8 117.9 117.8 -0.1 2.6
Services 51.82 131.1 133.6 133.9 0.2 2.1
1.2011 CPI basket weights at January 2013 prices, Canada, effective February 2013. Detailed weights are available under the Documentation section of survey 2301 (www.statcan.gc.ca/imdb-bmdi/2301-eng.htm).
2.Figures may not add up to 100% as a result of rounding.
3.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, consult the Bank of Canada website (www.bankofcanada.ca/rates/indicators/key-variables/inflation-control-target/).
4.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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