Inflation is Hot!
The title sums it up. Thanks to gasoline prices and related costs, inflation is now 3.7% year over year for May, the largest jump in about 8 years, and it’s cause for concern. Yes, a large portion of the jump is due to gasoline prices, but not entirely, and how will the Government react in terms of interest rates and policy? (according to our good friends at Stats Canada)
It is possible to argue that this is an aberration, and gas prices are already falling and that inflation may calm back down, and let’s hope that might actually be the case, however, the CPI climb has been fairly relentless since 2010, and speaking as a consumer lots of things are getting pretty darn expensive.
As you can see from the graphic Gas does take up a lot of the big jump in May (year over year).
As Stats Can points out:
Energy prices advanced 16.6% during the 12 months to May, following a 17.1% increase in April. Gasoline prices rose 29.5%, the largest increase since September 2005 when prices rose in the aftermath of Hurricane Katrina. The latest year-over-year increase follows a 26.4% gain in April, and leaves the gasoline index just below the peak level reached in July 2008. Prices were also higher for fuel oil (+28.2%) and electricity (+0.9%), while they declined 5.3% for natural gas.
Good to hear natural gas prices have dropped a little, but the gas and fuel oil price jumps are still hurting consumers and businesses right now.
How bad is Gas prices?
Given how low it has been, this rise is more than a little disconcerting.
Bank of Canada’s core index
The Bank of Canada’s core index advanced 1.8% in the 12 months to May, following a 1.6% gain in April. This is very interesting given the Bank uses their own barometer in terms of prices, and somehow energy and gas don’t have that big a weight in this, which is wild (IMHO).
Gas prices will drive up food prices, and have already done so, and now in Ottawa the Transit Commission and the Police are complaining they will be blowing their budgets for the year due to gas prices too. Hard to believe the Bank of Canada would not put a heavier weight on energy.
The Big Table
As my regular readers know, I love tables of numbers, and with the CPI Stats Canada has some amazing number sets to reflect how the data is derived.
| Relative import ¹ | May 2010 | April 2011 | May 2011 | April to May 2011 | May 2010 to May 2011 | |
|---|---|---|---|---|---|---|
| Not seasonally adjusted | ||||||
| % | (2002=100) | % change | ||||
| All-items CPI | 100.00 ² | 116.3 | 119.8 | 120.6 | 0.7 | 3.7 |
| Food | 15.99 | 122.9 | 126.9 | 127.7 | 0.6 | 3.9 |
| Shelter | 27.49 | 123.0 | 125.2 | 125.2 | 0.0 | 1.8 |
| Household operations, furnishings and equipment | 11.55 | 108.6 | 109.8 | 110.4 | 0.5 | 1.7 |
| Clothing and footwear | 5.31 | 92.7 | 93.1 | 93.7 | 0.6 | 1.1 |
| Transportation | 20.60 | 118.1 | 127.2 | 128.9 | 1.3 | 9.1 |
| Health and personal care | 4.95 | 114.6 | 117.3 | 117.2 | -0.1 | 2.3 |
| Recreation, education and reading | 11.20 | 103.6 | 105.1 | 106.1 | 1.0 | 2.4 |
| Alcoholic beverages and tobacco products | 2.91 | 132.1 | 135.0 | 135.7 | 0.5 | 2.7 |
| Special aggregates | ||||||
| Core CPI ³ | 82.15 | 115.7 | 117.2 | 117.8 | 0.5 | 1.8 |
| All-items CPI excluding energy | 89.92 | 114.6 | 116.7 | 117.3 | 0.5 | 2.4 |
| Energy | 10.08 | 137.4 | 159.2 | 160.2 | 0.6 | 16.6 |
| Gasoline | 5.80 | 147.1 | 186.8 | 190.5 | 2.0 | 29.5 |
| All-items CPI excluding food and energy | 73.93 | 112.8 | 114.4 | 115.0 | 0.5 | 2.0 |
| Goods | 47.80 | 109.4 | 113.7 | 114.4 | 0.6 | 4.6 |
| Services | 52.20 | 123.2 | 125.9 | 126.7 | 0.6 | 2.8 |
A Year Ago?
So a year ago inflation was moderating with gas prices coming back into line.
Inflation and Consumer Price Index 2011
- Inflation Slows a Little to End 2011. Consumers paid 4.4% more for food in the 12 months to December, down from 4.8% the month before. The year-over-year change for food purchased from stores eased in December to a 5.0% gain from 5.7% in November.
- CPI still Hot for November 2011 in Canada. Consumer prices rose 2.9% in the 12 months to November, matching the October increase. While the 12-month change in gasoline prices continued to ease, year-over-year food prices remained high.
- CPI Slows for October 2011 in Canada. Energy prices rose 11.7% in the 12 months to October, down from a 12.5% gain in September. On a year-over-year basis, gasoline prices rose 18.2%, after advancing 22.7% in September. Prices for fuel oil increased 22.1% in October, following a 27.4% rise the month before. Electricity prices rose, while natural gas prices continued to decline.
- Inflation on the Rise in September in Canada (2011). Energy prices rose 12.5% in the 12 months to September, after a 13.4% increase in August. On a year-over-year basis, gasoline prices rose 22.7%, after gaining 22.8% in August. Fuel oil prices rose 27.4%, while natural gas prices fell 4.7%.
- CPI on the Rebound August 2011 in Canada. The 0.4 percentage point difference between the year-over-year increases posted in August and July mainly resulted from price increases for passenger vehicles, electricity, homeowners’ home and mortgage insurance, telephone services, and jewellery.
- Inflation Slows in July 2011 but Still High(ish). Energy prices rose 12.9% in the 12 months to July, after a 15.7% increase in June. On a year-over-year basis, gasoline prices rose 23.5%, compared with the 28.5% gain in June. In contrast, natural gas prices fell. Food prices rose 4.3% in the 12 months to July, matching June’s increase. Excluding food and energy, the Consumer Price Index (CPI) increased 1.2% in the 12 months to July, after advancing 1.4% in June.
- CPI Slows in Canada (June 2011). Prices for food purchased from stores rose 4.8% in the 12 months to June, up from 4.2% in May. Energy prices rose 15.7% in the 12 months to June, after increasing 16.6% in May. On a year-over-year basis, gasoline prices rose 28.5%, slightly less than the 29.5% gain in May. Fuel oil and electricity prices also rose, while natural gas prices fell 4.6%.
- Yikes: CPI hits 3.7% Gas to Blame for May 2011. Energy prices rose 16.6% in the 12 months to May, after a 17.1% increase in April. Gasoline prices rose 29.5%, the largest increase since September 2005, when prices rose after Hurricane Katrina. The latest year-over-year increase follows a 26.4% gain in April, and leaves the gasoline index just below the peak level reached in July 2008. Fuel oil prices were also higher (+28.2%), and electricity prices rose (+0.9%), while natural gas fell 5.3%.
It’s crazy that oen particular commodity can affect the everything else. This demonstrates that we should all push to mvoe from consuming so much oil. As the BRIC countries modernize further, we will only compete more for these natural resources. Add to that speculators trying to cash in and everyone except investors lose.