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.
I agree, I sit here thinking that my yearly raise this year hovered around twice what the CPI is for the year, and since I’m getting it starting this pay I should be getting ahead . . . why don’t I feel like it.
Well, it does have an effect, it’s in the transportation section according to the weightings.
The only thing I keep thinking is that the government cut the GST, as promised, against all economists warning that it’s a silly thing to do. I wonder if they did that specifically to hide the fact that inflation is looming. Consider that if you add 1% to the price of most of the things in the CPI then the CPI would increase by slightly less than 1% (because some items don’t have GST). Lets say just for arguments sake that it’s 0.8% of an effect. That means between Feb 2007 and Feb 2008 the actual inflation of prices was 2.6%, not 1.8% as advertised, only the GST is softening the impact. If the GST hadn’t have been cut, the BoC would not have the flexibility of reducing the rate as it does now since inflation concerns would be all over the news, not news that inflation is at a great place.
It’s a big conspiracy I tell you . . . conspiiiiiiiiiracy! 😉
Well conspiracy is a little strong, but then again, you aren’t actually paranoid if the world is against you!!!! 🙂
I still feel my collective buying power decreasing as I sit here.
I wonder if we’re going to get hit with inflation like the US is fearing now. Perhaps we’re just in ‘the calm before the storm’ right now? There are far too many variables for us mere mortals to figure out what’s going on.
That is my fear as well, how can gas being at $1.10 a liter have no effect (affect?) on the economy? I buy the concept that a strong Canadian dollar is offsetting this somewhat, but Gas is expensive in Canadian dollars already! It is not going to drop in price.