Canadian Personal Finance Blog

Not surprisingly we are already being warned that gasoline prices may start to jump this summer (again), which is a little late, given gasoline is now above $1.30 in Ottawa, and does not look to be dropping any time soon.

With this in mind, this may mean a continued increase in Inflation. The arithmetic is quite simple:

• Shipping prices will need to increase which means an across the board price increase
• Food prices will increase as it will cost farmers more to plant and harvest
• etc., etc., etc.,

This is really nothing new, but will it drive more folks to use their cars less? I don’t think so, the price of Gasoline seems to be fairly Inelastic (to bandy about an actual term from Economics), in that a continuing increase in price does not seem to decrease the usage of the product (much like cigarette prices sky rocketing hasn’t stopped smokers from smoking).

How will I fight this? I will continue to use the bus, for the forseeable future, and I will continue to buy my Gas at Costco, as well. There are plenty of interesting ways to try to save gasoline as well, which I have discussed here and there are other places where you can get gas saving tips as well, but my question good reader is are there interesting ways to save gas that you don’t hear folks talking about?

No, I don’t want to hear about how you are siphoning gas from  your neighbour’s car, or the like, but what about other ways?

Year over year 2012′s Consumer Price Index ended at 2.3% according to our friends at Stats Canada. The drop from last month’s 2.9% is being attributed to gas prices moderating (i.e. not increasing as fast, and in some instances almost dropping a smidge), and car prices dropping a little.

This is not to say that Gas prices are really dropping, but that the increase compared to last year at this time doesn’t seem quite as bad. The actual rise of gas prices year over year was about 7.6% as compared to last month where the year over year where gas was effectively up 13.5%, so it looks like the gas price increase is declining (but not the price really).

Other words from Stat Canada:

Consumers paid 4.4% more for food in the 12 months to December, following a 4.8% increase the month before. The year-over-year change for food purchased from stores eased in December to a 5.0% gain from 5.7% in November.

Bouncy, bouncy graph

Even though the CPI is moderating the bad news is that prices are up in every major category on the Index. Everything ends up costing more year over year, is never a good thing to read.

Since 2002, you can see how inflation has chewed away the actual value of a Canadian Dollar, and this period has been low, what happens if inflation suddenly heats up?

Bank of Canada’ Core Index

What the Bank of Canada thinks the inflation rate runs at is even more important, because they are the only one who has a brake for the economy (i.e. Money supply rules and Interest Rates), and luckily they think it is actually a little lower than their target which is around 2.0%, using their index. This means interest rates won’t jump due to inflation for this month.

The Bank of Canada’s core index rose 1.9% in the 12 months to December, after increasing 2.1% in November. Increases were recorded for food purchased from restaurants and passenger vehicle insurance premiums, while prices for the purchase of passenger vehicles declined.

The seasonally adjusted monthly core index posted no change in December.

The BIG Table

Where were the biggest jumps in the CPI? Always check out the Stats Canada web pages for more details, but I always love publishing one of their BIG tables too.

Table 1 Consumer Price Index and major components, Canada - Not seasonally adjusted

Our friends at Stats Canada published the November CPI numbers for Canada yesterday and the good news is that the rate of growth has not changed from October, however it is still relatively high at 2.9%. This increase is in spite of Gasoline prices moderating, and is caused mostly by food price increases (which hurts everyone).

Consumer prices rose 2.9% in the 12 months to November, matching the increase in October. While the 12-month change in gasoline prices continued to ease, the year-over-year increase in food prices remained high.

It seems like Gas and Food take turns on who(m) will be the key element to keep driving inflation, but food prices are most certainly up in the Ottawa area, whereas gasoline has been dropping slowly in price (although I do fully expect a Christmas spike in the next few days).

Gas Price Changes

As you can see Gas prices are moderating (somewhat), but then again, while the price is moderating, it isn’t really dropping by that much either. I guess those folks who bought Hybrids 2 years ago are chuckling to themselves.

CPI With and Without Food

More interesting is seeing CPI not including food, which makes the whole CPI thing a non-issue (in my opinion). Food prices jumping hurts everyone, especially lower income folks or fixed income folks.

Erosion of your Spending Dollar

This graph is really telling, because it shows the erosion of the value of your earned dollars compared to inflation, not the steepness of the curve lately? Never a good thing.

Bank of Canada’s core index

The Bank of Canada’s core index, which excludes eight of the Consumer Price Index’s most volatile components as well as the effects of changes in indirect taxes on the remaining components, rose 2.1% in the 12 months to November. This matched the rise posted in October. Increases were recorded for passenger vehicle insurance premiums, meat and bakery products.

This is better news for interest rates, but inflation does continue it’s slow methodical upward push, and when will higher interest rates be coming? I have no idea any more.

The Big Table

For my regular readers here is my favorite part of the Stats Canada report, the Big Table which shows each part of the index, enjoy it and look closely!

Consumer Price Index and major components, Canada - Not seasonally adjusted

The Bank of Canada announced yesterday that they will be holding their key overnight rate at 1.0% for now and maybe for the foreseeable future.

Uncertainty around the global economic outlook has increased in the weeks since the Bank released its October Monetary Policy Report (MPR). Conditions in global financial markets have deteriorated as the sovereign debt crisis in Europe has deepened. Additional measures will be required to contain the European crisis. The recession in Europe is now expected to be more pronounced than the Bank had anticipated in October, as a result of increased deleveraging and tighter financial conditions, as well as necessary fiscal austerity and structural reforms.

The Bank will of course keep watching carefully to see if that raise rates some time in the future, or more correctly they will try to figure out if the Canadian economy could withstand higher interest rates (or worse when they have to raise the rates to combat the highly simmering Inflation Rate).

A quizzical comment in the document:

Although total CPI inflation has been slightly higher than projected, the Bank continues to expect the inflation rate to decline as a result of reduced pressures from food and energy prices and ongoing excess supply in the economy. Core inflation has also been slightly firmer than projected and is expected to ease as the output gap persists well into 2013.

They think inflation may stay under wraps, but I am not so sure.

Time to think about locking in your Mortgage rates? Maybe, if you don’t think you can withstand interest rates taking a sudden jump, then maybe it is time to lock in, me I will continue to stay with my floating rates (for now).

Inflation continues to rumble along, but it’s rate has slowed a little (year over year) from last month dropping from 3.2% from last month to 2.9% this month. This is better news, but still a fairly high number, and a real catalyst for more economic fun and games if it continues at the current rate.

Energy prices increased 11.7% during the 12 months to October, easing from the 12.5% gain in September. On a year-over-year basis, gasoline prices rose 18.2%, after advancing 22.7% in September. Prices for fuel oil increased 22.1% in October, following a 27.4% rise the month before. Prices for electricity rose while prices for natural gas continued to decline.

We continue to be at the mercy of spiralling energy prices, and its domino effect on other areas, and we see that food continues to increase at about a 4.0% rate (year over year), which is bad too.

CPI for the Past Little While

Without energy and food CPI is running at 1.5%, but in my opinion those two are the two key parts of the entire Index. Gas prices are actually stabilizing (in Ottawa at least), but I suspect as the Christmas season looms on the horizon more pricing shenanigans may start-up again.

Gasoline Price Index for the Past 12 Months

Bank of Canada’s Core Index

Seeing as the B of C is kind enough to keep their own version of CPI we should acknowledge it:

The Bank of Canada’s core index rose 2.1% in the 12 months to October, following a 2.2% gain in September. Increases were recorded for food purchased from restaurants, passenger vehicle insurance premiums and for the purchase of passenger vehicles.

The seasonally adjusted monthly core index increased 0.2% in October, after rising 0.3% in September.

This rate being only at 2.1% means the Bank won’t be as worried about raising interest rates (yet).

The Big Table

You can find this version of the big table here, but I include it for your reading pleasure.

Consumer Price Index and major components, Canada - Not seasonally adjusted