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Inflation Slows in July but Still High(ish)

Friday Stats Canada announced their Monthly Consumer Price Index numbers for July 2011 and the year ending July 2011, and while the numbers are better than they have been, they still continue to run high enough to make policy makers scratch their heads about whether it will be time to act on them (soon).

There is some accounting changes now that the HST is a year old (yea?!?) and the Nova Scotia tax increase is a year old as well (the comparison is apples to apples again), but the relatively stable gas prices seems to be the major reason the inflation rate is lowering some over the past couple of months. This may change with the coming of the fall and folks going back to school, but for now, the rate stands at 2.7% year over year ending in July 2011.

As usual the authors of the report point out the role that food and energy had in these numbers:

Energy prices advanced 12.9% during the 12 months to July, following 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 the increase in June.

Excluding food and energy, the Consumer Price Index (CPI) increased 1.2% in the 12 months to July, after advancing 1.4% in June.

So we see a slowing of the price increases, but prices are still going up.

Can this all cause a reaction by our friends at the Bank of Canada? My hypothesis is not yet, given how completely buggered up the world economic picture is, if Canada jumps their interest rates, we’ll have a sudden influx of money and a spike in the Canadian Dollar that will kill the Canadian Manufacturing Sector. This is only my opinion, and I have been wrong before and will be wrong again (so please do not act on this statement without checking with professionals).

What is the Bank of Canada counting?

The Bank of Canada’s core index advanced 1.6% in the 12 months to July, following a 1.3% gain in June.

On a month-over-month basis and before seasonal adjustment, the core index increased 0.2% in July after decreasing 0.6% in June.

So the numbers are lower if you count like the Bank of Canada, but what is coming down the pipe in terms of Market Upheavals could mean decisions may be made with other concepts in mind.

The Big Table

As my regular readers know, I love to publish some of the Big Tables that Stats Canada publishes monthly as well, and here is the one to look at closely:

Consumer Price Index and major components, Canada – Not seasonally adjusted

Relative importance¹ July 2010 June 2011 July 2011 June to July 2011 July 2010 to July 2011
% (2002=100) % change
All-items CPI 100.00² 116.8 119.8 120.0 0.2 2.7
Food 15.99 123.7 128.3 129.0 0.5 4.3
Shelter 27.49 124.3 125.4 125.9 0.4 1.3
Household operations, furnishings and equipment 11.55 109.2 110.7 110.7 0.0 1.4
Clothing and footwear 5.31 88.8 90.4 89.7 -0.8 1.0
Transportation 20.60 117.4 125.5 125.0 -0.4 6.5
Health and personal care 4.95 115.6 116.9 116.7 -0.2 1.0
Recreation, education and reading 11.20 105.1 106.0 106.8 0.8 1.6
Alcoholic beverages and tobacco products 2.91 134.5 135.6 136.1 0.4 1.2
Special aggregates
Core CPI³ 82.15 115.5 117.1 117.3 0.2 1.6
All-items CPI excluding energy 89.92 115.0 116.8 117.0 0.2 1.7
Energy 10.08 139.8 157.0 157.9 0.6 12.9
Gasoline 5.80 147.8 183.5 182.5 -0.5 23.5
All-items CPI excluding food and energy 73.93 113.0 114.3 114.3 0.0 1.2
Goods 47.80 109.1 112.8 112.9 0.1 3.5
Services 52.20 124.5 126.8 127.1 0.2 2.1
1. 2009 CPI basket weights at April 2011 prices, Canada, effective May 2011. Detailed weights are available under the Documentation section of survey 2301 (
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 (

Feel Free to Comment

  1. There is no doubt that life is becoming more expensive. And, I don’t know about you, but my wages are not keeping up.

  2. Thanks mostly to oil and food prices, there is inflation. Oil affects all transportation for all products and services.

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