Canadian Personal Finance Blog

As suspected the CPI for April is up, says Stats Canada. The rate for March year over year was 1.4% but for April year over year it is 1.7%, which seems to suggest the high price of gas is starting to make it through the system and is being reflected in consumer prices.

Gasoline was the main contributor to both the acceleration and the 12-month increase of the all-items index. Gasoline prices rose 11.6% between April 2007 and April 2008, compared with a 7.9% increase posted a month earlier.

There was no way higher gas prices was not going to start this kind of a cascade, and now the question is what is the Bank of Canada going to do about interest rates?

The interesting number I see is that food, the one commodity that I would have been positive was very affected by high gas prices only was up 1.2%, which seems odd (or maybe it just hasn’t gone through the system yet).

Stay tuned folks looks like a bumpy ride ahead!

OK, so I was wrong (again) the price of gasoline is not driving up prices in Canada, in fact the rate of increase in pricing is decreasing (which is to say, prices ARE going up, just not that fast). Stats Canada is now saying that the Consumer Price Index increased by 1.8% year over year for February 2008, which is astounding, given the price of gasoline.

The main reason seems to be the strength of the Canadian dollar and it’s effects on the prices of other mainstream products (the price of cars is actually dropping). Some highlights are:

• Energy prices were up 9.7% year over year, which is no surprise and this was the highest increase by area.
• Clothing and footwear actually dropped by 1.4% which is a reflection of a strong dollar.
• Shelter costs were up 4.1% and Services were up 3.5% which is interesting but all other areas had much smaller increases in prices.

An interesting point brought forward about Ontario in specific:

Ontario consumers experienced the fastest slowdown in consumer prices in the 12-month period to February 2008.Consumer prices rose 1.5% on average in Ontario during this period, compared with 2.1% in January. A slower rise in gasoline prices was mainly responsible for this loss of momentum. Pump prices rose only 14.8% in February, compared with 26.0% in January.

The 12-month growth in consumer prices was especially strong in Alberta (+3.5%) and Saskatchewan (+3.4%). British Columbia consumers experienced the most modest price gain (+1.1%). This is mainly a reflection of the smallest 12-month rise in gasoline prices (+11.3%).

I guess it wouldn’t surprise someone living in Fort McMurray to hear that it is expensive to live in Alberta?

Fed To Lower Another Rate

The Fed in the U.S. is talking about lowering yet another rate to attempt to alleviate the financial sense of despair and malaise in the U.S. economy. Soon, they may give you money to borrow money? No wait, that is how we ended up in this predicament.

That was an interesting expression I heard a financial pundit make once, about a short lived rebound in the markets, during a severe down turn, and it is very true, was yesterday a recovery? I have no idea, will it continue? Ask me tomorrow. As the Canadian Capitalist said in a very eloquent statement (which I will shamelessly steal):

If you panicked during yesterday’s sell-off, you should take a hard look at your asset allocation and see if you are taking on more risk than you can stomach. There is nothing worse than selling in a panic and locking in your losses.

Very true words, and much better than, “With great power comes great responsibility”.

Personal Experience

During Monday’s panic, I actually went out and bought more banks. I can’t tell you that it was an epiphany, or some other thing, but I decided I was going to get a Dividend paying asset “on sale”, so I went out and bought it. Was it the right move? Again, ask me in about 6 months and I’ll tell you then.

Small c conservative

Many folks have assumed I am a Big “C” conservative (and a member of the party), I am actually a small “c’ conservative and vote as my conscience suggests at each election. I am conservative in investing only because I have been burned so many times being way too excited about possible profits.

Make an Investment Plan

If anything has been learned, you must have a financial plan, and a plan on how you want to deal with your investments, so you aren’t part of the panicking masses during these market downturns. Do what you think is comfortable for you.

Let me repeat one point that I have read in Michael James’ blog and in others, that I repeated yesterday as my own strategy as well. If you have short term money that I need to live on or pay off debts, it should not be in equities, because I need that money not to shrink or disappear. If this is conservative, then I am conservative. All my equity investments are in funds I will need in 5 years or more.

Interest Rates Lower

I understand that this is needed to save some folks in peril in the states, but I really don’t understand a 3/4 point slash by the U.S. Federal Reserve. Hope they know what they are doing, because it seems a little extreme to me.

Give Blood

I am giving blood for the 11th time (I hope), I challenge my readers and fellow financial bloggers to do the same. No you don’t get a tax write off, but you do help save lives.

Some random ideas for the end of an interesting week:

• The Canadian dollar has plummeted back to parity with the Yankee dollar, which may be a good thing at the end of it all. Guess I’m glad I follow Larry McD’s advise to pick up some VTI when the dollar was at $1.10 .
• I got my “new to me” car, which is very nice to drive. Yes I could have gone to the states and maybe got it cheaper, but I’d rather give my mechanic the business for now.
• Stats Can talked about leading indicators being up by 0.1% in October which shows a slowing in the Canadian Economy, but still positive growth, so that is good too.
• Is Cross Border car shopping affecting new car sales in Canada? Not sure, but we shall see.
• Christmas shopping explosion should begin next week with American Thanksgiving being a little earlier than usual as well. Remember what Christmas is, and try not to turn it into an excuse to spend money.

Have a great weekend all!