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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Who said Inflation ? CPI Up in Canada

Friday our friends at Stats Canada published their monthly Consumer Price Index report and to very few folks surprise, Inflation continues to rise and last month (May 2014) the year ending Inflation rate rose to 2.3 % thanks to Gasoline, Natural Gas and Electricity rates jumping in price across Canada.

At first blush 2.3% doesn’t sound that scary, given we have lived through worse, but the Government and Bank of Canada have both stated publicly that the trigger CPI rate for them to start looking at raising interest rates is 2.0% and we are now over that. Will Inflation continue its upward rise? Not sure, but we’ll have to watch closely.

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

As you can see Energy may well be the spark to push Interest Rates higher. Stats Canada gives you the grim numbers to explain this:

Prices for gasoline increased 6.3% in the 12 months to May, while natural gas prices advanced 21.3%. Electricity prices rose 7.0% year over year in May, following a 4.6% rise in April. The faster rise in the electricity index was led by a gain in Alberta. At the national level, consumers also paid 12.7% more for fuel oil in May.

All the gas price increases are being explained as problems in the Middle East, as for Natural Gas evidently we used too much? In Ontario we already knew that we were going to pay a lot more for Electricity, and now we have given the Liberals a vote of confidence on this gouging, so things aren’t going to get cheaper.

It is also sad that the typical sin commodities like smokes and booze are going up quickly as well, so we can’t even commiserate over a drink.

Seasonally adjusted monthly Consumer Price Index
Seasonally adjusted monthly Consumer Price Index

This graph always worries me and the fact that the slope keeps increasing is not good either.

Bank of Canada’s core index

The Bank of Canada’s core index rose 1.7% in the 12 months to May, after increasing 1.4% in April. Meat, traveller accommodation and electricity were notable contributors to the faster rise in May compared with April.

This is the important one to look at in terms of Interest Rates and such, and even the Bank of Canada’s rate is starting to enter the “we better do something about this” zone. Currently the monetary policy would be viewed as “Over stimulating” the economy, however, inflation will trigger a need to change the policy to a less stimulating configuration.

 

The Big Price Table

Here we can see the exact culprits for the Inflation jump.

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

Relative importance1 May 2013 April 2014 May 2014 April to May 2014 May 2013 to May 2014
% (2002=100) % change
All-items Consumer
Price Index (CPI)
100.002 123.0 125.2 125.8 0.5 2.3
Food 16.60 132.6 134.6 135.7 0.8 2.3
Shelter 26.26 128.3 132.4 132.6 0.2 3.4
Household operations, furnishings
and equipment
12.66 114.0 115.5 115.8 0.3 1.6
Clothing and footwear 5.82 93.9 95.0 94.5 -0.5 0.6
Transportation 19.98 129.2 132.2 132.7 0.4 2.7
Health and personal care 4.93 118.3 118.9 119.2 0.3 0.8
Recreation, education
and reading
10.96 106.5 106.2 107.8 1.5 1.2
Alcoholic beverages and tobacco products 2.79 141.1 145.1 146.2 0.8 3.6
Special aggregates
Core CPI3 84.91 121.2 122.7 123.3 0.5 1.7
All-items CPI excluding energy 91.44 120.1 121.6 122.1 0.4 1.7
Energy4 8.56 159.3 171.2 172.7 0.9 8.4
Gasoline 4.62 183.3 193.2 194.8 0.8 6.3
All-items CPI excluding food
and energy
74.85 117.3 118.8 119.1 0.3 1.5
Goods 48.18 115.0 117.5 117.9 0.3 2.5
Services 51.82 130.9 132.9 133.6 0.5 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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CPI Jumps to 2.0 in April 2014 in Canada

CPI Takes a Jump in April 2014

Our friends at Stats Canada published on Friday their Consumer Price Index Report for the year ending April 2014, and it seems like our economy is starting to heat up, with inflation running year to year at about 2.0% . Last month year over year we were only at 1.5%, so this could be either a one month “blip” or the start of full blown inflation returning to our happy economic world (haven’t seen much of it in the past 10 years or so).

Specifically they stated:

The Consumer Price Index (CPI) rose 2.0% in the 12 months to April, following a 1.5% increase in March. The rise in April was the largest since April 2012.

The old energy bugaboo has come back to visit, and given the prices of gasoline in Ottawa, I am not surprised. Specifically the terrible triad I am seeing are:

  1. Automobile Gasoline prices that keep yo-yo’ing however, they never quite go down as low as they did previously.
  2. Electrical costs sky-rocketing (in Ontario the good)
  3. Natural Gas prices jumping 40% due to it being a “cold winter” (that is an exact quote from Enbridge).

Without energy being included inflation is running about 1.4%, so you can see the direct impact of this in the CPI, and how these price jumps work in the background of other costs (like shipping costs, and storage costs, etc.,) remains to be seen trickling through the numbers over the next few months.

CPI

Figure 1 Year Over Year Inflation with and without Energy included for Past While

 

Figure (1) is a nice graph illustrating just how energy prices can skew the data badly for CPI.

Before we jump all over Energy costs as being the sole reason we are paying more, there is another useful graphic to look at here:

Prices by Category

Figure 2 Price Increase in all major components

Figure (2) shows that SIN is becoming more expensive as well (Booze, Tobacco) , putting a roof over our heads is costly as well, and driving to work isn’t getting cheaper either. Life is getting more expensive every day.

What Does the Bank of Canada Think?

As we know the Bank of Canada has it’s own measurement of the CPI and using the Bank of Canada Core Index yardstick prices only rose (year over year) 1.4%, which is just below the “economy working OK” window that the Bank has published, but will this mean they aren’t thinking about raising interest rates to cool things down? That only time will tell.

The Really Big Table

Figure (2) is showing us graphically what is more expensive, but this table is showing us the real numbers this is all based on.

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

  Relative import1 April 2013 March 2014 April 2014 Mar to
Apr 2014
Apr 2013
to Apr 2014
  % (2002=100) % change
All-items Consumer Price Index (CPI) 100.002 122.7 124.8 125.2 0.3 2.0
Food 16.60 132.1 134.4 134.6 0.1 1.9
Shelter 26.26 128.2 131.4 132.4 0.8 3.3
Household operations, furnishings and equipment 12.66 114.3 115.7 115.5 -0.2 1.0
Clothing and footwear 5.82 94.7 94.0 95.0 1.1 0.3
Transportation 19.98 128.6 131.7 132.2 0.4 2.8
Health and personal care 4.93 118.6 118.1 118.9 0.7 0.3
Recreation, education and reading 10.96 105.2 106.5 106.2 -0.3 1.0
Alcoholic beverages and tobacco products 2.79 140.1 145.3 145.1 -0.1 3.6
Special aggregates
Core CPI3 84.91 121.0 122.5 122.7 0.2 1.4
All-items CPI excluding energy 91.44 119.9 121.5 121.6 0.1 1.4
Energy4 8.56 158.0 167.2 171.2 2.4 8.4
Gasoline 4.62 181.3 189.2 193.2 2.1 6.6
All-items CPI excluding food and energy 74.85 117.2 118.6 118.8 0.2 1.4
Goods 48.18 114.9 117.0 117.5 0.4 2.3
Services 51.82 130.3 132.5 132.9 0.3 2.0

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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Inflation Jumps in March 2014

Thanks to the new Energy Crisis (or energy gouging depending on how you want to look at it), Inflation started to jump in March (year over year) by 1.5%.

Specifically Stats Canada points out in their report:

The larger year-over-year rise in the CPI in March compared with February was led by energy prices, which rose 4.6% in the 12 months to March, following a 1.6% increase in February. Gasoline prices rose 1.4% on a year-over-year basis, after decreasing 1.3% in February. In addition, the natural gas index increased 17.9% in March, following a 5.5% rise in February. The rise in the natural gas index in March was mainly attributable to a price increase in Alberta.

Enbridge is jumping Natural Gas prices, Ontario is jacking up their Electric rates and gas prices are going up like wild-fire in Ottawa, all in all, I smell a start to inflation again? We shall see if I am correct or not.

Inflation for Past Little While

Inflation for Past Little While, JUMP!

A very interesting saw tooth pattern seems to be happening over the past while, isn’t it?

Overall if this trend continues, it might actually get the Bank of Canada’s attention.

Inflation for past little while

Seasonally Adjusted Consumer Price Index Overall for the past little while

Bank of Canada’s Index

Remembering that the Bank of Canada has its own “basket of goods” that it measures inflation with, their version of inflation was not quite as high as Stats Canada’s version:

The Bank of Canada's core index rose 1.3% in the 12 months to March, after increasing 1.2% in February.

Not as high, but still troubling.

The Big Table

What is going up in price? Here is a non-seasonally adjusted table for you (look for Shelter, Energy, and Alcohol):

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

Relative import1 March 2013 Feb 2014 Mar 2014 Feb to Mar 2014 Mar 2013 to Mar 2014
% (2002=100) % change
All-items Consumer Price Index (CPI) 100.002 122.9 124.1 124.8 0.6 1.5
Food 16.60 132.4 134.3 134.4 0.1 1.5
Shelter 26.26 128.0 130.7 131.4 0.5 2.7
Household operations, furnishings and equipment 12.66 114.7 115.3 115.7 0.3 0.9
Clothing and footwear 5.82 95.3 91.0 94.0 3.3 -1.4
Transportation 19.98 129.5 130.8 131.7 0.7 1.7
Health and personal care 4.93 118.3 118.4 118.1 -0.3 -0.2
Recreation, education and reading 10.96 105.2 106.4 106.5 0.1 1.2
Alcoholic beverages and tobacco products 2.79 139.8 142.9 145.3 1.7 3.9
Special aggregates
Core CPI3 84.91 120.9 122.1 122.5 0.3 1.3
All-items CPI excluding energy 91.44 120.0 121.0 121.5 0.4 1.3
Energy4 8.56 159.9 162.6 167.2 2.8 4.6
Gasoline 4.62 186.5 183.7 189.2 3.0 1.4
All-items CPI excluding food and energy 74.85 117.2 118.2 118.6 0.3 1.2
Goods 48.18 115.4 115.6 117.0 1.2 1.4
Services 51.82 130.3 132.5 132.5 0.0 1.7

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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Inflation at 1.1%, That is Low for February

A week ago our friends at Stats Canada put out their monthly Consumer Price Index report for February 2014, and year over year Inflation was running at a low-ish 1.1%, which is not likely to trigger any kind of reaction from the Bank of Canada (at least it shouldn’t).

This month gasoline helped keep the index down, but how much longer will that work? Gas is back up to $1.30 in Ottawa, and the big “kick in the lower abdomen” will be Enbridge’s 40% Natural Gas jump and Ontario’s Hydro price jumps too.

How much has Gasoline prices jumped around in the past little while, have a look at this graph, and note the index on the left, those are some wild price swings:

Gas Price Index

Gas Price Index for the Past Little While

The weird part of that graph is the way prices changes are not increasing slowly they slash up and down at an alarming rate.

The scary thing to look at is food prices, to quote our Stats Canada amigos:

Prices for food purchased from stores increased 1.0% on a year-over-year basis, led by higher prices for fresh fruit (+7.5%) and meat (+2.1%). In contrast, prices for dairy products, sugar and confectionery as well as fruit juices declined in February. Prices for food purchased from restaurants increased 1.1%.

Given the problems with the weather in North America, Fresh Fruit prices sky rocketing is to be expected, but it isn’t appreciated.

If we started at 2002 as a start where sits the CPI now, 12 years later? This graph will help you with that:

CPI year over year for past little while

CPI Year over year for the past little while (100 was at 2002)

Not exactly hyper-inflation.

The Big Table

As usual I include one of the big tables from the report showing the parts of the basket that is the CPI:

Table 1
Consumer Price Index and major components, Canada - Not seasonally adjusted

Relative importance1

February 2013

January 2014

February 2014

Jan
to Feb 2014

Feb 2013
to Feb 2014

%

(2002=100)

% change

All-items Consumer Price Index (CPI)

100.002

122.7

123.1

124.1

0.8

1.1

Food

16.60

132.9

133.0

134.3

1.0

1.1

Shelter

26.26

127.9

130.5

130.7

0.2

2.2

Household operations, furnishings and equipment

12.66

114.3

114.7

115.3

0.5

0.9

Clothing and footwear

5.82

91.4

89.2

91.0

2.0

-0.4

Transportation

19.98

130.3

129.2

130.8

1.2

0.4

Health and personal care

4.93

118.6

118.3

118.4

0.1

-0.2

Recreation, education and reading

10.96

104.7

104.7

106.4

1.6

1.6

Alcoholic beverages and tobacco products

2.79

139.4

140.9

142.9

1.4

2.5

Special aggregates
Core CPI3

84.91

120.6

121.3

122.1

0.7

1.2

All-items CPI excluding energy

91.44

119.7

120.1

121.0

0.7

1.1

Energy4

8.56

160.1

160.2

162.6

1.5

1.6

Gasoline

4.62

186.1

179.5

183.7

2.3

-1.3

All-items CPI excluding food and energy

74.85

116.9

117.3

118.2

0.8

1.1

Goods

48.18

115.2

114.2

115.6

1.2

0.3

Services

51.82

130.1

131.9

132.5

0.5

1.8

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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