Inflation Stays High Despite Lower Gas in October

in Bank of Canada, Inflation, Stats Canada

Back in 2014 Inflation worries were there, but little did we know what was coming.

Our friends at Stats Canada published their monthly report on the Consumer Price Index, and the numbers are not what I was guessing it might be (in that it is still inching up in the Bank of Canada Red Zone).

To quote the report precisely:

Higher prices for shelter and food led the rise in the CPI. At the same time, larger year-over-year price increases for transportation and for clothing and footwear contributed the most to the acceleration in the CPI.

So, day-to-day living costs of shelter and food are up last month and thanks to transportation continues to drag the year over year number up? Lovely.

CPI For Past Little WHile
The 12-month change in the Consumer Price Index, from October 2009 to October 2014

To be more clear about the shelter increase year over year, Stats Canada pointed out:

Shelter costs rose 2.8% in the 12 months to October, led by a 20.1% gain in natural gas prices. Consumers also paid more for electricity, homeowners’ home and mortgage insurance as well as rent in October compared with the same month in 2013. Property taxes rose 2.2% on a year-over-year basis, while mortgage interest cost declined 0.2%.

That is wild that mortgage rates actually lowered the cost of shelter over the year? Wow. The Natural Gas and Electricity increase makes me shake my head. Here in Ontario the Electricity cash grab was mostly due to bad management and government interference, and the Natural Gas is mostly due to artificially created shortages by mismanagement on the part of the Natural Gas suppliers (see a repeating theme here).

While I am confident there are those saying, “Why worry CPI is at 2.5% and my income is growing faster than that“, and you may be correct, but that is assuming these stats reflect the actual world (I always view them as a “it increased at least this much” point of view, I suspect prices actually went up higher, but how the data is manipulated makes it more optimistic). If inflation runs at 2.5% and you get a 3.2% raise and your investment grow at 3.0%, yes you are ahead but only by 0.7% in terms of income and 0.5% in terms of savings.

CPI for past little while
Seasonally adjusted monthly Consumer Price Index, from October 2009 to October 2014

Bank of Canada’s core index

The Bank of Canada’s core index rose 2.3% in the 12 months to October, after increasing 2.1% in September.

The seasonally adjusted core index increased 0.2% on a monthly basis in October, matching the gains in September and August.

This is important because this is the Red Zone for Bank of Canada in terms of interest rates, so we have best watch out if this creeps up a little more, we may see an easing of lower interest rates (to use banker baffle gab speak).

The Big CPI Data Table

This month’s big table is the seasonally adjusted numbers, not sure how this adjustment works, but have a look and see if you can figure it  out.

Consumer Price Index, major components and special aggregates – Seasonally adjusted

  August
2014
September
2014
October
2014
August to
Sept 2014
Sept to
Oct 2014
  (2002=100) % change
All-items Consumer Price Index (CPI) 125.6 125.8 125.9 0.2 0.1
Food 135.4 136.3 136.4 0.7 0.1
Shelter 132.4 132.5 132.8 0.1 0.2
Household operations,
furnishings and equipment
117.8 117.5 117.8 -0.3 0.3
Clothing and footwear 93.2 93.8 94.1 0.6 0.3
Transportation 131.2 130.5 130.9 -0.5 0.3
Health and personal care 119.2 119.2 119.1 0.0 -0.1
Recreation, education and reading 107.8 107.9 108.1 0.1 0.2
Alcoholic beverages and
tobacco products
148.4 148.5 149.2 0.1 0.5
Special aggregates          
Core CPI 123.6 123.8 124.1 0.2 0.2
All-items CPI excluding
food and energy
119.5 119.6 119.8 0.1 0.2

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