Shocking Electricity Price in August (CPI Canada)

The game of numbers, known as the Consumer Price Index from Stats Canada (for August), continue to show an optimistic story on the surface, and a more interesting one underneath the sheets. (Remember: Lies, Damn Lies and Arithmetic)

The following two lines from the report outline things nicely:

The Consumer Price Index (CPI) rose 1.1% on a year-over-year basis in August, following a 1.3% gain in July.

Excluding gasoline, the CPI was up 1.7% year over year in August, after posting a 1.9% increase in July.

Without gasoline, numbers are still not bad, but then have a look at the data in detail, where you find out that year over year, Electricity rates are up 5.2% (across Canada). In Ontario, I am sure it is even bloody higher!

Main contributors to the 12-month change in the CPI:

Main upward contributors:

  1. Purchase of passenger vehicles (+5.2%)
  2. Homeowners’ replacement cost (+4.0%)
  3. Electricity (+5.6%)
  4. Food purchased from restaurants (+2.5%)
  5. Air transportation (+5.7%)

Main downward contributors:

  1. Gasoline (-11.5%)
  2. Natural gas (-9.9%)
  3. Travel tours (-5.6%)
  4. Telephone services (-1.2%)
  5. Fuel oil (-11.8%)

See, if you look at the numbers close enough, you can really depress the hell out of yourself.

CPI by Category

CPI by Category for Past 12 Months

Bank of Canada’s core index

The Bank of Canada’s core index increased 1.8% year over year in August, following a 2.1% gain in July.

The importance of this, is that while this is still within the Bank of Canada’s “comfort zone” for inflation, interest rate increases may still happen (you just can’t blame it on Inflation (directly)). Also remember, the Governor of the Bank stated, Lower-for-longer interest rates require adjustments, better read what needs to happen to keep rates low (your sphincter might tighten a little).

Inflation in Canada

Bank of Canada Operational Guide for Inflation

Reports from the Past While.

If you want to have a walk down memory lane about how prices have gone up, here you go.

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Electricity Prices Continue to Sizzle in July

If you glance at the report from Stats Canada you will see the usual fairly good news in terms of the Consumer Price Index for July:

The Consumer Price Index (CPI) rose 1.3% in the 12 months to July, after increasing 1.5% in June.

This sounds heartening (having grown up in the days of inflation running at 11% or higher), but again, you have to peel the onion to get a better view of what is really happening.

Main contributors to the 12-month change in the CPI:

Main upward contributors:

  1. Purchase of passenger vehicles (+5.4%)
  2. Homeowner’s replacement cost (+3.6%)
  3. Electricity (+5.4%)
  4. Food purchased from restaurants (+2.7%)
  5. Air transportation (+7.1%)

Main downward contributors:

  1. Gasoline (-14.0%)
  2. Natural gas (-10.3%)
  3. Fuel oil (-13.4%)
  4. Mortgage interest cost (-0.7%)
  5. Children’s clothing (-4.1%)

So this data shows that Electricity (the alleged energy of the future) keeps going up in price, and Gasoline prices continue to obfuscate the Inflation data. In Ontario electrical rates are very high and will be going up

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

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

As you can see from the graphic, gasoline continues to skew the data badly.

The interesting other things that are lowering the index is Mortgage Interest Costs, which won’t slow down the scorching hot summer Real Estate market in many cities.

Bank of Canada’s core index

The Bank of Canada’s core index increased 2.1% in the 12 months to July, matching the rise in June.

This is still in the zone where the bank may not take Interest Rate action, but note that the Bank’s rate is significantly higher than the Stats Canada rate.

Inflation in Canada by Category

Inflation by Category for July

Reports from the Past While.

If you want to have a walk down memory lane about how prices have gone up, here you go.

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Food Prices up 4.1% For 2015 in Canada


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To the surprise of absolutely no one in Canada who has walked into a grocery store lately, Stats Canada announced on Friday that the Inflation rate (year over year) for December 2015 (and thus effectively the year 2015) rate of inflation was 1.6%, which seems gosh darn just grand, but as usual this smelly onion’s aroma is only divulged as you look deeper in the layers of the numbers published.

Cauliflower” by User Anthony DiPierro on en.wikipedia – Licensed under Public Domain via Commons

As we can see from this simple graphic, the numbers are a little cock-eyed if you look a little closer to the details of the report. In the gory details of the report you find a much richer explanation of what is going on in terms of the price of food:

Consumers paid 3.7% more for food in December compared with the same month a year earlier. Prices for food purchased from stores were up 4.1% year over year in December, following a 3.7% increase the previous month. The acceleration was mainly attributable to the fresh vegetables and fresh fruit indexes, which rose more on a year-over-year basis in December than in the previous month. In contrast, the meat index increased less in the 12 months to December (+2.4%) than in November (+3.9%). Prices for food purchased from restaurants rose 2.8% year over year in December, matching the increase in November.

A more detailed part of the report goes into even more interesting details:

Main contributors to the 12-month change in the CPI:

Main upward contributors:

  1. Purchase of passenger vehicles (+3.1%)
  2. Fresh vegetables (+13.3%)
  3. Homeowners’ home and mortgage insurance (+8.9%)
  4. Fresh fruit (+13.2%)
  5. Electricity (+3.8%)

Main downward contributors:

  1. Gasoline (-4.8%)
  2. Natural gas (-12.9%)
  3. Telephone services (-2.5%)
  4. Mortgage interest cost (-1.3%)
  5. Fuel oil (-16.8%)

Hence all of the discussions about the head of Cauliflower costing $8 in some places? The serious part of this, is that homeless shelters and similar services are now having problems with their food budgets for the winter. The fact that home and mortgage insurance rates are spiking is another interesting issue that not many folks are talking about?

Bank of Canada’s core index

Remember that the Bank of Canada’s measure of inflation is a bit different, and as they are the ones that might raise interest rates in response to any inflationary spirals, we should check what they think about inflation.

The Bank of Canada’s core index was up 1.9% in the 12 months to December, following a 2.0% rise in November.

Reports from Previous Months in 2015

If you want to have a walk down memory lane about how prices have been going up, here you go.

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Gas Dampens CPI for July

For yet another month the lowering price of gasoline and transport continues to dampen (and possibly hide) a CPI that has been around 2.0 % or higher for a long time (yet it continues to be called 1.0%, fun eh?). Stats Canada stated for July:

Lower energy prices continued to moderate the year-over-year rise in the CPI; however, the effect was less pronounced in July than in the previous month. In particular, the gasoline index was down 12.2% in the 12 months to July, compared with a 14.1% decrease in June.

I am sick of how these numbers are being used to hide the fact that inflation is high enough that interest rate controls on them should have been triggered months ago, but due to Canada’s population being Debt Junkies the government is too petrified of what this might entail. The other side of the coin is with oil revenues dropping, and gas prices dropping Canada is paying the price as well.

I am simply being paranoid? Maybe, but if you look at this graph, you will see my statement about 2.0% inflation (without gasoline) is maybe not as much me being paranoid, as being prudent:

CPI for past while

CPI for past little while, with and without energy

I think the center of my vitriolic commentary centers around the numbers is the following statement:

Food prices advanced 3.2% in the 12 months to July, following a 3.4% increase the previous month. Prices for food purchased from stores were up 3.5% on a year-over-year basis in July. The increase in the food index was led by meat prices, which rose 6.1% year over year in July, following a 6.6% increase in June. Additionally, prices were up year over year in July for fresh vegetables and fresh fruit. Prices for food purchased from restaurants rose 2.7% in the 12 months to July.

Food has been over 3% growth for a good long time, and anybody who shops for food knows this, but nothing is being done about it, and the press dismisses it because gas is so darn cheap? You know what really galls me the most? None of the major party leaders have even batted an eye about this.

Bank of Canada’s core index

The nice thing about the Bank of Canada, is their index doesn’t include energy:

The Bank of Canada’s core index was up 2.4% in the 12 months to July, following a 2.3% rise in June.


Food for thought?

The Big Graph

This graphic does an excellent job showing what is really up, and what is keeping the CPi down:

 

Year over Year CPI

Interesting that Transportation is the only one down?

 

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Do Canadians Borrow For Wealth ?

The Bank of Canada (and Stats Canada as well) put out a withering barrage of information every month, that I don’t even try to keep up with, but on occasion I am motivated to go over and check things out, and sure enough, this month I found some very interesting information in the Bank of Canada Banking and Financial Statistics June 2015. Be warned this is a PDF file with over 100 pages of tables and data, but the one table that caught my eye was Table C7 : Chartered banks: Quarterly classification of non-mortgage loans  (I have included a somewhat transcribed version at the end of this article).

As with all data, many different lemma, theories and ideas can be implied or inferred, but I will attempt to make two simple comparisons:

  • Borrowed money for investing compared to Car Rentals
  • Investing vs. Funds held on Credit Cards

Here are two harder to read graphs, that show the trends for the past 10 years (including Q1 in 2015), the big table of the real data is at the end of the article (as well).

Credit and Lease Debt

Car Leases and Credit Cards are what we borrow for (not to build wealth)

If you can make out the colours and such, you will see the really big increase in Credit Card and Vehicle Debt over the 10 years and the very small increase in loans to borrow for RRSPs and General investing. I am not really a big fan to borrow to build wealth, and it seems most Canadians don’t think of that, but holy cow, we do want to borrow to buy “things” like Vehicles, Mobile Homes and “stuff” on our Credit Cards.

The numbers are telling:

  • Private Passenger vehicle loans in 2005 were about $15,577,000,000 but now they are $72,961,000,000 almost quintupled over 10 years (2 complete doublings)
  • For Credit Cards $38,922,000,000 in 2005 but by 2010 $75,738,000,000 almost 1 complete doubling in 10 years.

What does this really mean? I guess we Canadians love our cars, love our stuff, and are wary of borrowing money to invest? (yes an over simplification, but the numbers do seem to point in that direction.

 The Big Table from the Bank of Canada

I do suggest having a look at this data on line as well:

Table C7 : Chartered banks: Quarterly classification of non-mortgage loans
Millions of Dollars
Loans to Canadian individuals for Non-Business Purposes
To Purchase Securities To Purchase Consumer Goods and other Personal Services Total
Tax Sheltered plans Marketable stocks and bonds Private Passenger Vehicles Mobile Homes Rennovations of residential properties Other Subtotal Credit Cards Total
V33760 V37759 V37755 V37756 V37757 V37758 V37754 V37753 V37752 V37751
2005 1,262 3,476 15,577 460 2,824 146,231 165,092 38,922 204,014 208,752
2006 1,300 3,714 16,218 422 3,178 158,824 178,642 41,998 220,640 225,654
2007 1,183 3,876 17,311 388 3,721 178,768 200,188 50,638 250,826 255,885
2008 1,099 3,220 23,002 370 4,903 207,126 235,401 53,703 289,103 293,423
2009 1,306 3,531 33,870 372 3,848 235,530 273,620 57,792 331,412 336,249
2010 1,326 3,789 42,095 200 3,618 247,113 293,027 61,325 354,352 359,468
2011 1,242 3,515 49,347 188 3,328 274,229 327,091 81,811 408,902 413,658
2012 1,487 3,521 54,992 242 3,774 285,252 344,260 78,969 423,229 428,237
2013 1,345 3,067 63,862 258 2,569 291,899 358,589 76,886 435,475 439,886
2014 1,070 3,628 71,981 829 3,155 291,750 367,715 79,046 446,761 451,459
2015 QI 1,573 3,713 72,961 814 3,114 291,887 368,775 75,738 444,513 449,799

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