That is what the CIBC and their analyst Zafar Bhatti thinks. Same reasons as previous Loonie flights but still worth noting:
An excellent quote from the CIBC is:
…This puts the Bank of Canada between a rock and a hard place, if they signal rates are going to rise, the Canadian dollar will make a run for parity or stronger…
A blip over the summer with a subsiding in the fall might be a good thing for Canadian consumers, maybe.
Well, actually it can be a very big deal if the Canadian dollar gets really strong, it will cause Canadian products to be too expensive for your Yankee cousins (whether the Canadian dollar strengthens against the Chinese currency and the Euro remains to be seen). Many, many small Canadian firms rely on trade with the U.S. and a soaring Loonie will cause that market to dry up, unless the manufacturers slash prices in reaction to this rise.
Reverse cross border shopping will start again. Many things are cheaper in the U.S. if you simply look at the price tag, and if the Canadian Dollar can buy the same as a U.S. dollar, why shop in Canada? For someone in Ottawa you are 55 minutes from Ogdensburg, and not that far from other U.S. towns and cities that will see an influx of “Frost Back” Canadians with their Beaver Bucks in hand. This will help these border towns a great deal, but will have the reverse effect on Canadian border towns.
Is this a permanent thing? I have no bloody idea, but I am now looking at US Index funds (and ETF’s) thinking that if the Canadian dollar goes any higher am I getting a bargain? As is pointed out in the CIBC report, if American Inflation explodes (say because their Government is printing money as fast as they can spend it) and the U.S. Central Bank has to raise interest rates, then this will simply be a “bulge” which will subside quickly and the Canadian Dollar may slide back to where it has been (of course if Canadian Inflation explodes in reaction to American Inflation, the two factors may cancel each other out).
I would encourage you to read over this very interesting report and form your own ideas and opinions about where we are going from here (economically).
Don’t we live in interesting times?
Reader’s Note: Random Thoughts will return next week.
Also, watch for the First Big Cajun RRSP Software Giveaway! Coming real soon (once I figure out how it is going to work
).
Stats Canada announced the CPI for January and it looks like Inflation is starting to become more of a factor for the Bank of Canada to think about. Year over year for January Consumer Prices were up 1.9% (remember that in December year over year it was 1.3%), so the 0.6% jump is a big one.

Yes, it is Gasoline prices that are helping fuel this inflationary jump, and this could mean follow on price increases as this price increase percolates through the system.
The increase in the all-items Consumer Price Index (CPI) was due primarily to gasoline prices. In January, gasoline prices were 23.9% higher than they were in January 2009. This follows a 25.6% rise in the 12 months to December 2009.
Gasoline prices exerted upward pressure on the CPI for the third consecutive month, as a result of price volatility in the second half of 2008 and the first half of 2009. Prices at the pump have been relatively stable since July 2009.
More importantly the Bank of Canada’s Core rate (which is what they start looking at for when they wish to increase interest rates) is now around 2.0% (year over year) up from 1.5% in December, which may cause the Bank of Canada think tank to start re-thinking when they plan on turning on the Interest Rate economy brakes, which most think is June July timeframe, but if we see another Inflationary jump next month, it may be sooner.
For those who love details and numbers, I present the Big Table for your perusal:
| Relative importance | Jan-09 | Dec-09 | Jan-10 | Dec 2009 to Jan 2010 | Jan 2009 to Jan 2010 | |
| % change | ||||||
| All-items | 100.002 | 113 | 115 | 115.1 | 0.3 | 1.9 |
| Food | 17.04 | 120.6 | 121.8 | 122.3 | 0.4 | 1.4 |
| Shelter | 26.62 | 123.1 | 121.3 | 121.8 | 0.4 | -1.1 |
| Household operations, furnishings and equipment | 11.1 | 105.7 | 107.5 | 107.9 | 0.4 | 2.1 |
| Clothing and footwear | 5.36 | 91.8 | 90.6 | 90.1 | -0.6 | -1.9 |
| Transportation | 19.88 | 108.8 | 115.5 | 117.2 | 1.5 | 7.7 |
| Health and personal care | 4.73 | 110.4 | 113.2 | 113.8 | 0.5 | 3.1 |
| Recreation, education and reading | 12.2 | 99.7 | 102.8 | 101.1 | -1.7 | 1.4 |
| Alcoholic beverages and tobacco products | 3.07 | 129.2 | 131.2 | 131.1 | -0.1 | 1.5 |
| All-items (1992=100) | 134.5 | 136.6 | 137 | 0.3 | 1.9 | |
| Goods | 48.78 | 106.2 | 107.6 | 108.4 | 0.7 | 2.1 |
| Services | 51.22 | 119.7 | 121.8 | 121.8 | 0 | 1.8 |
| All-items excluding food and energy | 73.57 | 110.3 | 111.7 | 111.6 | -0.1 | 1.2 |
| Energy | 9.38 | 123.8 | 130.3 | 133.9 | 2.8 | 8.2 |
| Core CPI | 82.71 | 112.2 | 114.3 | 114.4 | 0.1 | 2 |
Stats Canada announced the CPI numbers for December and for all of 2009 and the trend started in November got a little more momentum with the CPI for 2009 being 1.3% (over 12 months), and Gasoline sits front and center again as an issue.

The rise in the all-items Consumer Price Index (CPI) was due primarily to gasoline prices, which exerted upward pressure on the CPI for the second consecutive month. This follows an extended period in which they were the main contributors to year-over-year declines in overall consumer prices.
For the year the big price jumpers were:
See the big table for the numbers.
I really like this table because it shows you all the ugly numbers together:
| Relative import1 | Dec 2008 |
Nov 2009 |
Dec 2009 |
Nov to Dec 2009 | Dec 2008 to Dec 2009 |
|
|---|---|---|---|---|---|---|
| Unadjusted | ||||||
| % change | ||||||
| All-items | 100.002 | 113.3 | 115.2 | 114.8 | -0.3 | 1.3 |
| Food | 17.04 | 119.8 | 121.5 | 121.8 | 0.2 | 1.7 |
| Shelter | 26.62 | 123.4 | 121.3 | 121.3 | 0.0 | -1.7 |
| Household operations, furnishings and equipment | 11.10 | 105.5 | 108.5 | 107.5 | -0.9 | 1.9 |
| Clothing and footwear | 5.36 | 91.3 | 95.1 | 90.6 | -4.7 | -0.8 |
| Transportation | 19.88 | 110.3 | 115.4 | 115.5 | 0.1 | 4.7 |
| Health and personal care | 4.73 | 109.9 | 113.6 | 113.2 | -0.4 | 3.0 |
| Recreation, education and reading | 12.20 | 101.2 | 103.7 | 102.8 | -0.9 | 1.6 |
| Alcoholic beverages and tobacco products | 3.07 | 128.7 | 131.3 | 131.2 | -0.1 | 1.9 |
| All-items (1992=100) | 134.9 | 137.2 | 136.6 | -0.4 | 1.3 | |
| Special aggregates | ||||||
| Goods | 48.78 | 106.5 | 108.6 | 107.6 | -0.9 | 1.0 |
| Services | 51.22 | 120.1 | 121.8 | 121.8 | 0.0 | 1.4 |
| All-items excluding food and energy | 73.57 | 111.0 | 112.2 | 111.7 | -0.4 | 0.6 |
| Energy | 9.38 | 123.0 | 132.4 | 130.3 | -1.6 | 5.9 |
| Core CPI3 | 82.71 | 112.6 | 114.7 | 114.3 | -0.3 | 1.5 |
Stats Canada published the November Consumer Price Index numbers yesterday and it is starting to get some momentum in the UP direction, with their index going up by 1.0% (year over year ending in November 2009).

The rise in the all-items Consumer Price Index (CPI) was due primarily to gasoline prices. Prices at the pump are now exerting upward pressure on the CPI after an extended period in which they were the main contributors to year-over-year declines in overall consumer prices.
Interesting that gas prices in December seem to be dropping, so how this changes next month’s CPI remains to be seen.

More importantly the Bank of Canada’s Core Index is up 1.5% year over year, which is starting to push inflation into the target zone for the Bank. If this upward pressure continues, this may push the bank to act sooner with an Interest Rate increase to hopefully put the brakes on any Inflationary explosion.
| (2002=100) | |||||
|---|---|---|---|---|---|
| Relative importance2 | November 2008 | November 2009 | October 2008 to October 2009 | November 2008 to November 2009 | |
| Unadjusted | |||||
| % change | |||||
| All-items | 100.003 | 114.1 | 115.2 | 0.1 | 1.0 |
| Food | 17.04 | 119.5 | 121.5 | 2.3 | 1.7 |
| Shelter | 26.62 | 123.4 | 121.3 | -1.6 | -1.7 |
| Household operations, furnishings and equipment | 11.10 | 105.5 | 108.5 | 2.6 | 2.8 |
| Clothing and footwear | 5.36 | 94.1 | 95.1 | 0.6 | 1.1 |
| Transportation | 19.88 | 113.2 | 115.4 | -3.1 | 1.9 |
| Health and personal care | 4.73 | 110.1 | 113.6 | 3.4 | 3.2 |
| Recreation, education and reading | 12.20 | 101.9 | 103.7 | 1.5 | 1.8 |
| Alcoholic beverages and tobacco products | 3.07 | 128.5 | 131.3 | 2.7 | 2.2 |
| All-items (1992=100) | 135.8 | 137.2 | 0.1 | 1.0 | |
| Special aggregates | |||||
| Goods | 48.78 | 108.1 | 108.6 | -1.7 | 0.5 |
| Services | 51.22 | 120.0 | 121.8 | 1.8 | 1.5 |
| All-items excluding food and energy | 73.57 | 111.3 | 112.2 | 1.3 | 0.8 |
| Energy | 9.38 | 130.7 | 132.4 | -12.7 | 1.3 |
| Core CPI4 | 82.71 | 113.0 | 114.7 | 1.8 | 1.5 |
NB: Random Thoughts may be on hiatus for a week or two, given the season coming up, or there might be a special Monday edition, if I feel exceptionally lazy next week.
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I am planning on doing a Top 10 postings for the Christmas/New Year stretch (given I may or may not be around), so if you have any suggestions for this kind of a list (top 10 for this year), please leave a comment with a title or story you may have particularly liked (written by me, that is).
Yes the CPI for October is up 0.1% year over year (as opposed to last month’s year over year which was negative), this means a modest increase overall in prices, which sounds good, but as usual the numbers may not reflect exactly what is really going on with prices in the marketplace.
Well you might ask the question, how much did energy affect this whole thing? Have a look at this graph:
The bad part about this is that energy still is buffering the index from reflecting real price increases in most areas of the CPI itself. Stats Canada points out:
I am getting tired of the price gouging on SIN items like liquor and smokes (luckily lottery ticket prices aren’t going up in prices, or I’d have nothing to buy on Fridays).
The Bank of Canada’s Core rate is at 1.8% year over year, which is creeping into the “optimal” range for the Bank of Canada, but it also means that if prices go up a little bit more (as a percentage), then we might see some action from the central bank in this area (i.e. Bank Rate hikes).
| Relative import | October 2008 | October 2009 | |||
|---|---|---|---|---|---|
| Unadjusted | |||||
| % change | |||||
| All-items | 100.00 | 114.5 | 114.6 | -0.9 | 0.1 |
| Food | 17.04 | 117.4 | 120.1 | 2.8 | 2.3 |
| Shelter | 26.62 | 123.2 | 121.2 | -1.8 | -1.6 |
| Household operations and furnishings | 11.10 | 105.2 | 107.9 | 2.2 | 2.6 |
| Clothing and footwear | 5.36 | 94.4 | 95.0 | -1.2 | 0.6 |
| Transportation | 19.88 | 117.0 | 113.4 | -7.2 | -3.1 |
| Health and personal care | 4.73 | 109.2 | 112.9 | 3.9 | 3.4 |
| Recreation, education and reading | 12.20 | 103.0 | 104.5 | 1.0 | 1.5 |
| Alcoholic beverages and tobacco products | 3.07 | 128.0 | 131.4 | 2.6 | 2.7 |
| All-items (1992=100) | 136.3 | 136.4 | -0.9 | 0.1 | |
| Special aggregates | |||||
| Goods | 48.78 | 108.9 | 107.0 | -3.7 | -1.7 |
| Services | 51.22 | 120.0 | 122.1 | 1.8 | 1.8 |
| All-items excluding food and energy | 73.57 | 110.6 | 112.0 | 0.9 | 1.3 |
| Energy | 9.38 | 147.5 | 128.8 | -18.7 | -12.7 |
| Core CPI | 82.71 | 112.2 | 114.2 | 1.5 | 1.8 |
Reader’s Note: Tomorrow will be my regular Random Thoughts post, and the conclusion of my Risk and Life postings will be on Monday.