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

The Magic 8-Ball of Stats Canada’s Leading Indicators Index seems to suggest that we have entered a recovery from the great Financial Apocalypse of 2009 (trademark pending).

To quote the actual post:

The composite leading index rose by 1.1% in August, after a 0.6% gain in July. The increase was the largest since April 2002. Growth in the leading index usually only exceeds 1% early in the recovery from a downturn. In August, 8 of the 10 components contributed to the advance, up from 5 the month before, as the manufacturing sector joined the advance.

So we are actually early in the recovery, well that’s good, it would be really bad if this reflected the end of the recovery, so I guess we can all be relatively happy about these numbers.

Housing and Stocks seem to be leading the way which is a good thing for folks with the forethought of buying stocks last November when prices were the lowest and not so good news for folks who haven’t got back into the market yet (might want to wait for a while, unless you like following the herd, then follow the other lemmings back into the market).

Interesting how most “pundits” are now saying the recovery has started and you should be getting your money in now, notice they also said last November that to help get us out of the coming recession we should spend, and of course during the recovery we’ll need to keep spending to sustain the recovery. Only question I could come up with was, “When do we STOP spending?”, maybe it’s just me.

The BIG Table

This table is actually enormous and I would suggest if you really want to read it click here and go check it out at the Stats Canada web site.

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.

I have found that in my life that I do not change unless the situation I am in, causes drastic change (i.e. I cannot do things in small measures, it must be a big thing). I need a good reason to change, and that reason can’t be rationalized easily, that is how I usually succeed.

Question: Could you live without a cell phone? Do you use your cell phone at your work? Do you text at work? Do you text or use your cell phone at work, when you should be working? Do you text message in meetings, or on teleconferences? Do you text while driving? If any of these questions made you think that you might be addicted to your cell phone, then good (let’s not get into the entire Crackberry generation, talk about enabling ADHD).

Currently my wife and I pay upwards of $90 a month for two cell phones, which is a ridiculous sum of money for how much we use this service. This and a few other factors are pushing me towards cutting down my cell phone usage, if not completely cutting it out (we’ll see if I can go all the way, and lose the addiction).

Our Cell Phone usage consists of:

• Text messaging each other and our kids (55% of time)
• Calling each other and home (35%)
• Calling others and emergency calls and such (less than 10%)

We will be cancelling our contract when it expires in a month or so and moving over to a pay per use model and see how that works (luckily we can keep our phone numbers).  I suspect that there will be moments where I might regret this decision, however, I will remember this is for a larger good.

CPI Tomorrow

Given my new position, I will be commenting on the CPI numbers (that come out today) in tomorrow’s posting, stay tuned.