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Canajun Finances Home » Gas Prices Drive Down Inflation in December 2014 to 1.5%

Gas Prices Drive Down Inflation in December 2014 to 1.5%

As I assumed the inflation numbers for the end of the year have gone completely squirrelyâ„¢ (my new term for numbers manipulated to create a false sense of security) thanks to plummeting gas prices. Given gas is almost 1/2 price compared to 2 years ago, which is nuts, but I just keep feeling this whole thing is a manipulation, but that remains to be seen.

Inflation was around 2.4% (year over year) just a short while ago, now it is at 1.5%, and there is a real chance of it dropping further, if gas prices continue to drop (although I note Diesel fuel prices are not dropping that fast, so the trucking industry or farmers are not basking in the joys of the current low gas prices).

How squirrely are these numbers?

The Consumer Price Index (CPI) rose 1.5% in the 12 months to December, following a 2.0% increase in November.

That is a 25% drop in one month for the year over year inflation numbers, pretty big, but what does it really mean?

CPI Past Little While
The 12-month change in the Consumer Price Index (CPI) and the CPI excluding gasoline

You can see without the gasoline, inflation continues to run above 2.0%, which is worrying, isn’t it? I bet you are asking just how much did Gas drop these past 12 months?

On a monthly basis and before seasonal adjustment, the gasoline price index fell 9.8% in December. Between June and December 2014, gasoline prices decreased 24.6%. In comparison, prices for gasoline declined 42.7% between June and December 2008.

Gas prices for past little while
Gasoline prices continue to fall in December

That is a bloody big drop. The graph shows how big a drop it was:

How does this all look in the big basket? This is the measure of the actual price over time.

Seasonally adjusted CPI
Seasonally adjusted monthly Consumer Price Index

Bank of Canada’s core index

Remember the Bank of Canada has their own way of measuring things, and they seem to not be taking gas into the equation (as much):

The Bank of Canada’s core index rose 2.2% in the 12 months to December, after increasing 2.1% in November.

Interesting that they lowered interest rates even with Inflation at 2.1%?

The Big Table

Let’s have a look at one of the big tables to see what has gone up in price

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

 Relative import1December
Nov to Dec 2014Dec 2013 to Dec 2014
 %(2002=100)% change
All-items Consumer Price Index (CPI)100.002122.7125.4124.5-0.71.5
Household operations, furnishings and equipment12.66114.7118.2117.8-0.32.7
Clothing and footwear5.8289.494.791.1-3.81.9
Health and personal care4.93118.1119.9119.6-0.31.3
Recreation, education and reading10.96105.3106.8106.1-0.70.8
Alcoholic beverages and tobacco products2.79141.2149.4149.1-0.25.6
Special aggregates      
Core CPI384.91121.0124.1123.7-0.32.2
All-items CPI excluding energy91.44119.9122.9122.5-0.32.2
All-items CPI excluding food and energy74.85117.1119.8119.3-0.41.9

1.2011 CPI basket weights at January 2013 prices, Canada, effective February 2013.

2.Figures may not add up to 100% as a result of rounding.

3.The Bank of Canada’s core index excludes eight of the CPI’s most volatile components (fruit, fruit preparations and nuts; vegetables and vegetable preparations; mortgage interest cost; natural gas; fuel oil and other fuels; gasoline; inter-city transportation; and tobacco products and smokers’ supplies) as well as the effects of changes in indirect taxes on the remaining components. For additional information on the core CPI, consult the Bank of Canada’s website.

4.The special aggregate “energy” includes: electricity; natural gas; fuel oil and other fuels; gasoline; and fuel, parts and supplies for recreational vehicles.


CANSIM tables 326-0020 and 326-0031.

Feel Free to Comment

  1. Funny how when gas prices go down you get disappointed if prices go up a few cents. When I filled up yesterday I was actually upset that I was paying more than 90cents a liter. Then I remembered when gas was $1.29 and I shut my mouth

    1. Yes, I actually cringed seeing 90 cents a litre this morning, after gasing up at 82 cents a litre yesterday night… wait a minute, wasn’t I paying $1.40 a litre 8 months ago? 😳

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