Canadian Personal Finance Blog

Consumer Price Index at 2.2% for May

Yes, inflation is on the rise folks, up from 1.7% in April, hope you aren’t surprised, because I sure as shooting am not!

For those who wish to note the obvious, from this month’s report we have the following statement:

The acceleration in consumer prices in May was mainly a reflection of the 12-month increase in gasoline prices. This acceleration in gasoline prices occurred as crude oil prices almost doubled between May 2007 and May 2008. Gasoline prices increased substantially across the country, rising the most in Quebec and Ontario.

I’ll take “State the Obvious” for $1600 Alex. This is only the beginning folks and this is going to trigger a reaction in interest rates, I think this might be time to start partying like it’s 1974, because we may be hitting that “tipping point” (to use an overused and trite term) and may be heading for some heady inflation rates real soon.

Property Tax Day in Ottawa

Given that the Hockey Night In Canada theme’s rights are already owned, I am curious what tune I might play as the theme for Property Tax Day in Ottawa (feel free to add ideas in the comments section), I’ll settle for the Beatles “Tax Man”, for now.

I had a look at my second payment for my property taxes this year, and I am struck by a few major points that I hadn’t noticed when I first bought it.

The City of Ottawa thinks my house has appreciated in value over the past 8 years by over 50% (if you calculate this by ( (New Price - Old Price) / Old Price ). I have done some work on the house, mostly upkeep things, but what would cause such an astronomical increase I have no idea. Yes I am living in one of the fastest growing suburbs in Canada (Nepean/Ottawa South), but new houses are going up around me faster than mushrooms in my back lawn!

There are a plethora of other interesting charges on my tax bill:

• Solid Waste Curbside pick up fee of $82.00, interesting, and I guess I don’t mind that, given I don’t want to go to the dump every week to drop my trash off.
• I am paying the Conservation Authority about $20.00, my only wish would be that they keep the Canada Geese and vermin in the parks and not in my backyard.
• A Capital Tax Levy, which I think is translated to “Give us more money dammit” of over $40
• Standard fees for Fire, Police, Transit and the actual money that goes to the City of Ottawa so they can afford all the interesting services they offer.

Am I getting good bang for my buck here? I guess, I do like the libraries a great deal, and we do use the recreational facilities a great deal. I just drove into work on the roads that the City supports, so I guess I should be paying for those as well, so I guess I am getting a bargain? At the end of it, I am paying %3.5 of my gross income on this.

BMO analyst did a survey and even with the Canadian dollar hovering around parity with it’s American cousin, prices of things in Canada are still 18% more expensive than they are in the U.S. . Is this surprising, not to me, price gouging has been going on for Canadians for a good long time, and I don’t expect parity in pricing in the next year if the Canadian Dollar stays at parity. When a CD costs $12.99 in Canada and $9.99 in the US (the same one) you can see that the Canadian market is not that important to the manufacturers. Do I sound bitter? You bet.

Tim Horton’s Savings Plan

Now with companies like Kia and Rogers using the “If you didn’t buy coffee you could buy this” in their advertising (please note I mentioned this first in the Tim Horton’s Savings Plan many years ago), maybe Tim Horton’s should start their own bank, like PC Financial. Offer points for frequent users and then they can introduce the save a nickel with every coffee, which would be their customer lock. Each time a customer buys with their Pre-paid card, 5 cents is deposited in a savings account for them (or their RRSP), Scotiabank already offers something like this as do other financial institutions.

Look for the “Bank of the Big Cajun Man” coming soon!

New Housing Price Increases Still Up

As with last month, this month’s year over year increase was lower at 5.2% and the month over month increase was Zero, which is quite interesting too. Have a look in the attached table for where you live and the new house price increase.

New housing prices increased at their slowest pace in more than two and a half years in April, despite strong markets in Saskatchewan, Newfoundland and Labrador and Nova Scotia.

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.