Inflation at 0.9% for May (maybe)

A week ago Stats Canada published their Consumer Price Index for the year ending May 2015, and the number they published was that the basket of articles that make up the CPI were up 0.9% year over year.

Given that Food is up it’s normal 3.8% year over year, how is the index only up 0.9%? You guessed it, Gas and energy prices (that complete Index was down 11.8% year over year):

  • Gasoline was down 17.4% year over year, but that will be changing with Gas prices going back up this month.
  • Natural Gas was down 14.4% for the year ending in May as well (not sure about those prices whether they are going up and such).
  • It’s not all good news though, Electricity is up 1.0% so not all of the energy index is down

Without this portion of the index, the actual CPI is up 2.2% year over year. More fun with numbers folks.

CPI with and without Energy

The CPI with and without Energy for the Past Little While

As this graph shows, the real CPI has been running about 2.0% or higher for a while. To see a better graph on what parts are going up and down, I present this interesting piece of data:

CPI components for past little while

The constituent parts and their increase (or decrease)

Bank of Canada’s core index

As we all know, the CPI by itself is only data, however, the system that uses this data (or one of them) is the Bank of Canada, and they will adjust interest rates accordingly, if they feel that inflation is “out of control”, so what does the Bank of Canada think ?

The Bank of Canada’s core index increased 2.2% in the 12 months to May, after rising 2.3% in April.

Bank of Canada CPI

Bank of Canada’s Current CPI, still within norms

CPI Reports for 2015 so far

The reports for this year so far:

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Prices up 0.8% in April or More Fun with Numbers

Apologies for the tardiness on this (family fun on the weekend caused me to miss this until today), but our amigos at Stats Canada published on Friday the April Consumer Price Index Numbers and if you include the price of gasoline the CPI for the year ending in April 2015 is up 0.8%, which sounds just wonderful (doesn’t it?).

For your monthly dose of “Fun with Numbers”, the second paragraph of the report outlines things nicely:

The smaller year-over-year increase in the CPI in April compared with March was mostly attributable to lower energy prices. Excluding energy, the CPI increased 2.2% on a year-over-year basis in April, following a 2.3% increase the previous month.

So inflation is really running at 2.2% ? Yes and no, which is always the best answer, because you are never wrong.

Fun with pictures?

CPI with and without Energy

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

The sad part of this is the ability for all of the Federal Political Parties to interpret this data in their own way, and thus making it a veritable cornucopia of confusion.

Another useful graphic to show just how “jerking back and forth” (to quote Devo) the Index is working:

Prices increase in seven of eight major components

Prices increase in seven of eight major components

Clear as mud, correct? You can see Gasoline dropping, but you can also see that Food prices are leading the charge on the increase side of things, which is never a good thing (unfortunately booze is there as well, so we can’t eat or enjoy our sins).

Bank of Canada’s core index

Surely the Bank of Canada will have a clear statement? Yes, and we are in the middle of their “sweet spot” for inflation, but if it gets above 3.0% we might see Interest rate hikes:

The Bank of Canada’s core index increased 2.3% in the 12 months to April, after rising 2.4% in March.

The seasonally adjusted core index was unchanged on a monthly basis in April, following a 0.4% increase in March.

Luckily they also have a snazzy graphic to help with that as well:

Bank of Canada View of Core CPI

Core CPI in the Bank of Canada View

CPI Reports for 2015 so far

The reports for this year so far:

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Expensive Food in Canada in March

Our friends from Stats Canada say that our basket of goods that makes up the Consumer Price Index went up only 1.2% year over year (with the year ending March 2015), which sounds just fine, but (as we know) the devil is in the details of these numbers, isn’t it?

The numbers sound lovely, except if you throw gasoline out of the equation and then your numbers change by increasing by a full 1 % (i.e. 2.2%).

CPI with and without Gasoline

CPI with and without Gasoline over the past little while

Given that gasoline had a 19.2% price drop (year over year) there must have been something else that went up a lot to keep the CPI going up the way it is. Any guesses as to what was the big nasty price increase? Booze and smokes (naturally) however, a close 2nd place is food which is up 4.2% (year over year), but looking closer, Meat is up 11%, so the meat eaters of Canada are taking it right in the wallet.

A quick glance at how “all over the place” prices are over the past 12 months:

Prices by Category

Price increases by category (past 12 months), compared with February

Luckily in Ontario booze prices are going to go up with the new Beer Tax proposed as well, yea! I suppose they could impose a Sirloin tax, but let’s hope they don’t think that far out of the box.

Bank of Canada’s core index

To help out with the confusing arithmetic, we have a different index for the Bank of Canada’s view, and remember their “sweet spot” for Inflation is 2.0%, and the past two months, their index has been over that, so are interest rate increases coming some time this year? Here is what Stats Canada said:

The Bank of Canada’s core index increased 2.4% in the 12 months to March, after rising 2.1% in February.

The seasonally adjusted core index rose 0.4% on a monthly basis in March, following a 0.1% increase in February.

However, the Bank of Canada already commented in this area, on Wednesday, and their statement about keeping their key overnight rate steady was:

Risks to the outlook for inflation are now roughly balanced and risks to financial stability appear to be evolving as expected. The Bank judges that the current degree of monetary policy stimulus remains appropriate and therefore is maintaining the target for the overnight rate at 3/4 per cent.

This was after they explained that the Canadian economy was “stalled” in the first quarter of 2015, so it seems the economy continues to be addicted to stimulants.

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Stats Canada published the Consumer Price Index a little earlier this month (this past Thursday), and as I guessed the continued oscillations of Gas prices has caused the January CPI to seem to suggest that prices only rose 1.0% year over year, which of course, is more fun with numbers. Without gas prices included the actual CPI is around 2.5%, and with gas prices going back up 25% this past month, look for a not so happy story in February.

CPI with and without gas prices

CPI with and WITHOUT Gas prices for the past little while

The major increase that impacts everyone is the 4.5% increase in Food prices, to quote Stats Canada:

Food prices advanced 4.6% on a year-over-year basis in January, the largest gain since November 2011. Prices for food purchased from stores were up 5.4% in the 12 months to January, following a 4.2% rise the previous month. Prices for both fresh fruit and fresh vegetables posted higher year-over-year increases in January than in December. Consumers paid 2.8% more for food purchased from restaurants in January compared with the same month in 2014.

Given all the cogitations of fuel prices the price of food has been steadily going up, and making it a lot harder for lower and middle-income Canadians to feed their families.

CPI for past little while

Seasonally adjusted CPI for past 5 years or so

Bank of Canada’s core index

Let us hope that the Bank of Canada has a more sane view of inflation?

The Bank of Canada’s core index rose 2.2% in the 12 months to January, matching the increase in December.

The seasonally adjusted core index rose 0.2% on a monthly basis in January, matching the gain in December.

Well, it is closer to the real numbers, but I suspect we will continue with our over-stimulated economy for a while longer.

Consumer Price Index, major components and special aggregates

A usual, I will include one of the big tables for you to see just how interesting all the numbers are, and you do the comparison on things.

 

Relative import1 January
2014
December
2014
January
2015
Dec 2014
to Jan 2015
Jan 2014
to Jan 2015
% (2002=100) % change
All-items 100.002 123.1 124.5 124.3 -0.2 1.0
Food 16.41 133.0 137.4 139.1 1.2 4.6
Shelter 26.80 130.5 133.0 133.1 0.1 2.0
Household operations, furnishings and equipment 13.14 114.7 117.8 118.0 0.2 2.9
Clothing and footwear 6.08 89.2 91.1 91.1 0.0 2.1
Transportation 19.10 129.2 124.9 122.4 -2.0 -5.3
Health and personal care 4.73 118.3 119.6 120.0 0.3 1.4
Recreation, education and reading 10.89 104.7 106.1 105.6 -0.5 0.9
Alcoholic beverages and tobacco products 2.86 140.9 149.1 149.9 0.5 6.4
Special aggregates
Bank of Canada’s core index3 85.39 121.3 123.7 124.0 0.2 2.2
All-items excluding energy 92.21 120.1 122.5 122.9 0.3 2.3
Energy4 7.79 160.2 148.7 139.5 -6.2 -12.9
Gasoline 3.84 179.5 149.9 131.3 -12.4 -26.9
All-items excluding food and energy 75.80 117.3 119.3 119.5 0.2 1.9
Goods 46.68 114.2 114.6 114.0 -0.5 -0.2
Services 53.32 131.9 134.5 134.7 0.1 2.1
  1. 2013 Consumer Price Index (CPI) basket weights at December 2014 prices, Canada, effective with the January 2015 CPI.
  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 index, 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 accessories for recreational vehicles.

Source(s):

CANSIM tables 326-0020 and 326-0031.

 

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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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