Gas Fuels Inflation for the end of 2010

in Bank of Canada, Inflation, Interest Rates, Stats Canada

Hybrids Needed?

Stats Canada published their monthly report on the Consumer Price Index for the 12 month period ending in December 2010, and the CPI jumped to 2.4% (year over year) from 2.0% (year over year) in the previous report. Our old friend gasoline prices seems to be the major culprit (which is interesting given gas prices haven’t seen a significant jump and with the Canadian Dollar at parity with the US dollar, what might be driving these prices up?). If gasoline is the fuel driving the Inflation monster, can we find a hybrid version and use less of it (rhetorical and silly commentary, please do not take seriously).

To quote our friends at Stats Canada:

Between December 2009 and December 2010, gasoline prices increased 13.0%, after advancing 7.2% in the 12 months to November. Excluding gasoline, the Consumer Price Index (CPI) rose 1.8% in December, identical to the increase recorded in November.

In addition to paying more for gasoline, consumers paid 6.2% more for electricity and 9.2% more for natural gas in December. Overall, energy prices rose 10.5% during the 12 months to December.

As the following graphs show Gasoline and Energy are the big issues in our basket of goods, this year.

CPI With and Without Gas Inclusion

As you can see without Gasoline our CPI is quite low, but with it, we are getting into areas that might worry the bank of Canada.

Gas Prices, Note the Lack of Significant Drops

We can also see that Gas prices have moderated (i.e. they are not having violent swings up and down), however, now the trend seems to be continually upwards (no more drops in prices). This is another bad thing.

Bank of Canada Core Index

This one is important because it is where the central bank looks to figure out whether they should be increasing our interest rates to control inflation, however it only advanced 1.5% (year over year) which is only a 0.1% jump from last month’s measurement, so no reason to panic (yet).

Loose money looks like it will continue for a while longer.

The Big Table

I simply love this table, just because it says so much, and has so much information about what we are buying and how the prices are going up in those areas:

Relative import1 Dec 2009 Nov 2010 Dec 2010 Nov to Dec 2010 Dec 2009 to Dec 2010
Not seasonally adjusted
% (2002=100) % change
All-items 100.002 114.8 117.5 117.5 0.0 2.4
Food 17.04 121.8 123.3 123.9 0.5 1.7
Shelter 26.62 121.3 124.4 124.6 0.2 2.7
Household operations, furnishings and equipment 11.10 107.5 109.5 109.3 -0.2 1.7
Clothing and footwear 5.36 90.6 92.1 88.8 -3.6 -2.0
Transportation 19.88 115.5 120.7 121.2 0.4 4.9
Health and personal care 4.73 113.2 116.1 115.8 -0.3 2.3
Recreation, education and reading 12.20 102.8 104.3 103.9 -0.4 1.1
Alcoholic beverages and tobacco products 3.07 131.2 134.6 134.6 0.0 2.6
Special aggregates
Core CPI3 82.71 114.3 116.3 116.0 -0.3 1.5
All-items excluding energy 90.62 113.5 115.6 115.4 -0.2 1.7
Energy 9.38 130.3 141.3 144.0 1.9 10.5
Gasoline 4.92 139.8 154.4 158.0 2.3 13.0
All-items excluding food and energy 73.57 111.7 113.9 113.5 -0.4 1.6
Goods 48.78 107.6 110.1 110.0 -0.1 2.2
Services 51.22 121.8 125.0 124.9 -0.1 2.5
1.
2005 CPI bask et weights at April 2007 prices, Canada, effective May 2007. Detailed weights are available under the Documentation section of survey 2301 (www.statcan.gc.ca/imdb-bmdi/index-eng.htm).
2.
Figures may not add to 100% as a result of rounding.
3.
The measure of Core Consumer Price Index (CPI) excludes from the all-items CPI the effect of changes in indirect taxes and eight of the most volatile components identified by the Bank of Canada: fruit, fruit preparations and nuts; vegetables and vegetable preparations; mortgage interest cost; natural gas; fuel oil and other fuel; gasoline; inter-city transportation; and tobacco products and smokers’ supplies. For additional information on Core CPI, consult the Bank of Canada website (www.bankofcanada.ca/en/inflation/index.htm).

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