Inflation in Canada Steady at 2.1%
Stats Canada on Friday announced the monthly and yearly Consumer Price Index (aka Inflation) numbers for August, and overall you think it’s not really that bad as the CPI is running at 2.1% (12 months previous to August 2013) which matches the same  year over year number for July, but, should we be celebrating? As usual with these numbers the devil is in the details.
The 12-month change in the Canadian Consumer Price Index
Even that graph starts to make you think that things are just fine, but again, you need to peel the onion to truly appreciate the horrible smell underneath (not to give onions a bad name). The first layer of the onion would tell you this:
Shelter costs rose 2.8% in August compared with the same month a year earlier. This increase followed a 3.0% gain in July. Natural gas prices increased 17.9% on a year-over-year basis in August, after rising 20.4% the previous month. Consumers also paid more for homeowners’ home and mortgage insurance.
Natural Gas prices up almost 18% year over year? Holy crap! That is how I heat my house, and heat my water, and now it costs a hell of a lot more than last year? More for Home and Mortgage Insurance, as well is no surprise, but I hope it is not a price gouge attempt (like the Natural Gas industry is enjoying).
The household operations, furnishings and equipment index rose 3.0% on a year-over-year basis in August, led by a 7.6% increase in the cost of telephone services. In addition, the cost of Internet access services rose in the 12 months to August.
Telephone costs are rising as well as Internet access prices are rising? No big surprise there given the monopolies in Canada (no mention of Cable TV costs, wonder where those line up on the list).
Bank of Canada’s core index
This is the one that the Bank of Canada looks at closely when it decides nasty things like whether interest rates should go up or not.
The Bank of Canada’s core index advanced 2.1% in the 12 months to August, after increasing 1.7% in July.
On a year-over-year basis, prices for some of the components included in the core index, such as telephone services and the purchase of passenger vehicles, increased more in August than in July. Movements in these indexes have a larger impact on the core index than on the All-items CPI because certain components are excluded from the core index.
At the same time, prices for gasoline, fresh fruit, fresh vegetables and natural gas, which are excluded from the core index, decelerated on a year-over-year basis in August.
That last line in bold is quite interesting, isn’t it? the Bank of Canada doesn’t count Gasoline, Fresh Fruit and vegetables or Natural Gas in their Index? Interesting.
Prices Big Table
One of my favorite of the big tables in the report is the one that goes by component (seasonally adjusted):
Consumer Price Index and major components – Seasonally adjusted1
| June 2014 | July 2014 | August 2014 | June to July 2014 |
July to August 2014 |
|
|---|---|---|---|---|---|
| (2002=100) | % change | ||||
| All-items Consumer Price Index (CPI) |
125.6 | 125.5 | 125.6 | -0.1 | 0.1 |
| Food | 136.0 | 135.8 | 135.5 | -0.1 | -0.2 |
| Shelter | 132.2 | 132.6 | 132.4 | 0.3 | -0.2 |
| Household operations, furnishings and equipment |
116.3 | 116.3 | 117.8 | 0.0 | 1.3 |
| Clothing and footwear | 93.5 | 93.5 | 93.1 | 0.0 | -0.4 |
| Transportation | 132.2 | 131.4 | 131.3 | -0.6 | -0.1 |
| Health and personal care | 118.8 | 119.1 | 119.2 | 0.3 | 0.1 |
| Recreation, education and reading | 107.5 | 107.5 | 107.8 | 0.0 | 0.3 |
| Alcoholic beverages and tobacco products | 146.7 | 147.1 | 148.4 | 0.3 | 0.9 |
| Special aggregates | |||||
| Core CPI2 | 123.2 | 123.3 | 123.6 | 0.1 | 0.2 |
| All-items CPI excluding food and energy3 | 119.1 | 119.2 | 119.6 | 0.1 | 0.3 |
I wonder if we’d get a more accurate rate of inflation if they “unhooked” it from what they use to increase fixed income payments and to increase RRSP contribution limits etc. Right now if they used “real” inflation they’d have to boost CPP and some other things quite a bit.
It’s certainly worth tracking your “personal” rate of inflation if you’re trying to more accurately forecast what you’ll need for retirement income.
Yes, the fact that vegetables, fruit and meat are much more expensive, yet CPP payments are staying the same, cannot be good news for those on fixed incomes.
It’s still expensive for Average Joe and Jane out there. We have wage deflation which never gets mentioned much, plant closures and corporations cutting staff. Every day you hear of more and more. Wait until 3G Capital takes out the wacking stick to Tim Hortons. It’s also amusing to think we’re getting a good deal on gas @ $1.17 per litre. Expensive but not as expensive as it was year over year. Markets continue to rocket higher and interest rates are at generational lows. Until we see rate tightening this party will continue for those who have the means and capital to invest. Sadly most don’t, their more worried about job loss. 51% of Canadians just admitted they couldn’t miss a paycheque or they’d end up in the ditch. In spite of the rosy numbers and forecasts the greatest fear out there is job loss.
Yeh the CPI seems to be a little bit of “smoke and mirrors” for the government to play with and say, “Things aren’t so bad”