Canadian Personal Finance Blog

Friday Stats Canada came out with the monthly CPI numbers and again prices were down 0.9% year over year (September to September). Last month we were down 0.8% year over year so that means the drop continues (OK, not for real given this is all due to Gasoline price fluctuation), so when do we call it Deflation?

The major contributor to the year-over-year decline in the Consumer Price Index (CPI) in September was energy products, as it has been for a number of months. Overall, in the 12 months to September, energy prices fell 18.7%.

Interesting, but given Energy prices started to moderate about this time last year, we may not be able to take advantage of that for much longer (of course I did say that last month didn’t I?).

Deflation Yet?

OK, so for real what were the big ups on the index? Food (of course), but surprisingly it seems to be moderating being only a 2.8% increase (year over year), however, Health and Personal Care is up 3.9% which is worrying with our aging work force (and with the looming PANDEMIC of Swine Flu). Alcohol and Fun stuff was up by 2.8% as well (why is it always the good stuff that keeps going up?), but Energies drop by 18.7% still looks astounding in the index.

The Big Deflation Table

CPI Down Sort of Again

Stats Canada announced on Thursday that the Overall CPI for the year ending August 2009 effectively dropped by 0.8% (the July year to year drop was a whopping 0.9%). Why? A few reasons but the cost of Gasoline is the major component of the overall CPI that caused this drop in prices.

CPI With and Without Gasoline

Gas Still Cheaper than Last Year at this Time

It’s hard to remember but last year at this time the price at the pump per liter for gasoline was still around $1.20 (in Ottawa at least) and now our prices are around 90 cents a liter, and this is a big dampening force for any large price increases in other parts of the CPI

Last Year Gas vs. This Year

Hard to remember that Gasoline is so much cheaper, but it is not too bad. Interesting to note that the graph also shows that our price right now is still higher than it was last December (so this “deflation” due to Gasoline may not continue on much longer).

Interest Rates Should Stay Lower

If you look at the Bank of Canada’s core index it is up 1.6% year over year, which is still well below the Bank of Canada’s goals for Inflation, which should mean that this will not be a reason for interest rates to creep up in the near future. Lower interest rates will allow for folks to pay down debt, or get their debt loads lower, which is a good thing (anyone seeing this as a reason to get farther into debt, please slap your left wrist with a metal ruler (like the Nuns used to)).

Big Culprit?

Given the monstrous differences in Gasoline prices, what could possibly be going up in price now? Food prices again are up over 4.0% year over year which is a bad thing for large households, as well as house and Personal Care areas were up a large amount (2.9%) as well.

My personal peeve of Alcohol and Beverages were up a whopping 3.1%, but no one dares complain about that!

Random Thoughts Return Next Week

Given how little I wrote this week, I felt putting out a “best of” posting for Friday would show just how slack a lifestyle I lead, so Random Thoughts will return next week.

Stats Canada came out with another interesting set of CPI numbers showing (in a way) that our deflationary spiral is accelerating (if you consider a 0.3% drop the previous month and the alleged 0.9% drop in June as a significant acceleration). Soon I’ll be able to buy bread for 2 cents a loaf? No, not at all likely, the reason we have a “drop” in the CPI this month is Energy Products mostly (a 23.4% decline year over year in that sector), and remember those prices moderated late last year, so that drag on the CPI will disappear as a factor in a few months too.

The CPI excluding energy (not seasonally adjusted) is actually up 1.8% (which is still below the Bank of Canada’s goals for inflation), however Food as a component is roaring ahead with a 5.0% (year over year) price increase (wish my investments had that kind of growth).

CPI For Past Little While

Gas prices

This graph shows how gas prices are lower right now, but look at the 2008 graph and how prices started to “moderate” in August and then dropped like a stone for the rest of the year. That damping force will be gone soon from the CPI numbers (so my bet is inflation is going to start moving up the charts again).

Gas Prices Last Year to This

Housing costs have dropped as well with the price of Natural Gas dropping  and the price of houses moderating as well (Shelter portion of the index dropped by 2.0%).

Price of Sin increases

The Sin portion of the Index (OK Alcoholic Beverages and Tobacco Products) is up a healthy 3.1% year over year as well, which means we can’t even drown our sorrows without paying more (for shame!).

The BIG Table

Have a look at the non-adjusted table values, always an interesting read.

Deflation Continues

Yes, the deflation train gains a little momentum with Stats Canada announcing that the Consumer Price Index for June drop by 0.3% year over year.

The decrease was due primarily to a 12-month decline of 19.0% in prices for energy products, particularly gasoline. Excluding energy, the CPI rose 2.1% in June.

So energy prices are still driving down inflation, however, Food is still running at 5.5% inflation year over year (but that is down from 6.4% last month).

A more interesting point mentioned later is:

The Bank of Canada’s core index advanced 1.9% over the 12 months to June, following a 2.0% rise in May.

That puts things higher into the acceptable range for the Bank of Canada, are they thinking of raising interest rates soon?

CPI for June still dropping

The Big Table

Quick Random Thoughts

This week the National Capital Financial Bloggers met and had some very invigorating discussions about a bunch of interesting topics (not all financial related), however the Flu Pandemic even touches these simple events with one member staying home with sick kids. Some of these financial mavens mentioned some interesting topics this week including:

• Michael James wrote about his Cheap Cell Phone, however his example is rather pedagogical since he is not an atypical phone user.
• The Money Grubbing Lawyer took a different plan and says, “I’ve been Cellphone Free for 7 Months“, this is another way to save money on cell phones!
• Preet at WhereDoesAllMyMoneyGo muses about the $10,000 subsidy the Ontarion Gov’t Announced for Electric Cars.
• The Canadian Capitalist asks How Does Pixar do it? Lots of computers and even more marketing, as usual.
• Canadian Financial DIY reviewed the book Inside The Mind of the Turtles and is giving away a copy.
• Larry MacDonald points out an excellent way Not To Pick A Financial Advisor.

Have a stupendous weekend.

With Summer coming very soon (on Sunday in fact), and Father’s Day on the same day this weekend looks to be an eventful one for us all.

Financially the week has seen the Nortel CEO Mike Z. standing in front of a group of Canadian politicians and saying, “It simply wasn’t feasible to pay severance,” , you have to respect his chutzpah, but when he started saying he might not get his sweetheart pension, I think he lost all credibility. With the CPI at 0.1% we are in interesting areas where allegedly our prices are not rising, yet the price of food is up 7.1% over 12 months, so the numbers are actually hiding a big issue (i.e. the poor and fixed income folks dealing with huge food price increases).  Evidently this means our interest rates may stay as low as they are for a while longer, which is just wild (IMHO).

Financial Blogging Views

Some interesting posts from my regular reads on the Financial blogging front:

• Techcrunch talks about the new Apple iPhone 3GS which is out today, will this entice more Canadians to sign up with Fido and Rogers (and their ridiculously expensive data plans)? I’m sticking with my iPod touch, thanks.
• Ellen Roseman has a little Fun and Games with her students at U of T’s continuing ed program, with Ellen Degenerates Share Club, she wins the funniest one liner of the week.
• Michael James points out that the CRA No Longer Taxing Loyalty Programs, with a few caveats added on. I wonder if my PC Points fit this new rule?
• The Canadian Capitalist points out that ‘Simply Save’ with TD Bank might be a no-brainer to sign up for, for someone like me who already does his banking with TD.
• Preet from WhereDoesAllMyMoneyGo points out that the Ultimate W Expert Challenge (which he is a part of) starts this weekend on Sunday! Worthwhile just to see and hear what Preet sounds like (since you aren’t likely to see me on the big screen any time soon).
• Larry MacDonald points out that Ontario Savings Bonds are on Sale (for a few days more), but wonders if it might be better just to go with high yield bank accounts?
• Riscario muses about The Three Major Obstacles to Growth according to Brian Tracy, which is a very interesting read.
• The Four Pillars writes about Freegans, which shouldn’t be confused with Veegans, and sound like the same guys who take my crap from the bottom of my driveway.

Stay tuned this weekend, there may not be a video interlude, but there might be something even more interesting. Enjoy the start of summer and remember to call your Dad on Father’s Day!