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CPI: How Many Negatives Make it Deflation? September 2009

in Bank of Canada, Inflation, Stats Canada

The Inflation Numbers for September 2009. Prices actually dropped then.

Stats Canada came out with the monthly CPI numbers and again prices were down 0.9% year over year (September 2008 to September 2009). September 2009 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%.

October 2009 from Statistics Canada

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?
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

 (2002=100)
 Relative importSept 2008Sept 2009Aug 2008 to Aug 2009Sept 2008 to Sept 2009
 Unadjusted
    % change
All-items100.00115.7114.7-0.8-0.9
Food17.04117.1120.44.02.8
Shelter26.62123.1120.9-2.2-1.8
Household operations and furnishings11.10105.6107.92.52.2
Clothing and footwear5.3696.194.9-1.7-1.2
Transportation19.88122.4113.6-6.7-7.2
Health and personal care4.73109.4113.72.93.9
Recreation, education and reading12.20103.9105.00.91.1
Alcoholic beverages and tobacco products3.07128.0131.33.12.6
All-items (1992=100) 137.7136.5-0.7-0.9
Special aggregates     
Goods48.78111.5107.4-3.3-3.7
Services51.22119.8121.91.71.8
All-items excluding food and energy73.57110.8111.80.90.9
Energy9.38161.5131.3-19.1-18.7
Core CPI482.71112.4114.11.61.5

Inflation in 2009

{ 1 comment }

  • Neil October 19, 2009, 9:19 AM

    It becomes deflation when core CPI goes negative. Until then, it’s fluctuation in volatile items (note that core CPI excludes both food and energy, the two biggest fluctuators).

    I’ve said it before and I’ll say it again. Headline CPI is useful for COLAs, since it reflects the actual difference in cost of living. But core CPI is the only thing that gives much indication of economic health.

    Reply

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