Low Inflation Means No More Interest Hikes ?

It would be imprudent to assume that low inflation, will mean no more interest hikes. The Bank of Canada has wanted to lower interest rate stimulation, and they will continue with this policy. They may slow down their rate plan but rates are going up.

Stats Canada on Friday published the monthly inflation report. The report overall shows that inflation is running at 1.0%, but as usual those numbers are deceiving. The detailed report shows a better view on things.

Main upward contributors:

  • Homeowners’ replacement cost (+4.1%)
  • Food purchased from restaurants (+2.5%)
  • Travel tours (+7.0%)
  • Traveller accommodation (+7.1%)
  • Natural gas (+10.0%)

Main downward contributors:

  • Electricity (-5.3%)
  • Gasoline (-1.4%)
  • Women’s clothing (-2.5%)
  • Men’s clothing (-2.9%)
  • Household appliances (-3.3%)

I am glad to see groceries specific are not mentioned here, but food purchased from restaurants took a bump. The generic graphic gives you a better overall view though.

Inflation by Category

Inflation by Category for June 2017

B of C Final Words on the Economy

The Bank of Canada has the following view on the Canadian Economy.


Growth in the Canadian economy is projected to reach 2.8 per cent this year before slowing to 2.0 per cent next year and 1.6 per cent in 2019.

That seems to be a very modest view on things, however, it all depends on what happens down south. Is it safe ? I have no idea.

2017 Inflation Discussion

Reports on inflation in 2017 so far.



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Gasoline Pushed Inflation to 2.1 %

The January Consumer Price Index numbers came in from Stats Canada and it seems like gasoline pushed inflation to 2.1 % year over year in January. A rate of 2.1% enters the Bank of Canada worrisome zone. Using the Bank of Canada’s measures things are not as worrisome. If you check the Bank’s site, their numbers show below 2.0% which is in their “acceptable” zone.

Highlights for January

Main contributors to the 12-month change in the CPI, Main upward contributors:

  1. Gasoline (+20.6%)
  2. Purchase of passenger vehicles (+3.8%)
  3. Homeowners’ replacement cost (+4.3%)
  4. Natural gas (+15.6%)
  5. Food purchased from restaurants (+2.3%)

Main downward contributors:

  1. Fresh vegetables (-15.5%)
  2. Fresh fruit (-10.8%)
  3. Meat (-1.7%)
  4. Bakery products (-3.2%)
  5. Cereal products (excluding baby food) (-5.3%)

Great news there in that fresh fruit and veggies are lower in price. We should all be eating a bit more healthy this month! The very bad news is Gas and Natural Gas prices sky-rocketing. Might want to turn the furnace down a little, and look at those hybrids again?

Historical Electricity Prices?

Stats Canada added a fun historical section, and this month, electricity prices.

Electricity has maintained approximately the same basket weight for the past 30 years. Since the basket update in 1986, the basket weight for electricity has ranged from 1.93% to 2.77% of the all-items CPI, and averaged 2.43%.

Given how much electricity prices have shot up in Ontario, wonder if this remains true?

Graph of the Month

CPI with and without gasoline prices is always an exciting graph to check out.

Gasoline Pushed Inflation

CPI or Inflation with and without gasoline included

2017 Inflation Discussion

So far 2017 has only one discussion:



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Surprising Job Picture in Canada in January

A surprising job picture from the Canadian Economy grew more jobs in January (2017), according to Stats Canada. This was unexpected by most economists, so a pleasant surprise (somewhat).

What Kind of Jobs ?

Surprising Employment Picture

Surprising Employment Story
(From Metropolitan Museum of Art Collection)

The unfortunate part of this story is that the economy is creating more part-time jobs (full-time job numbers are virtually unchanged). Why is this economy creating part-time jobs, or is that what is needed?

There is an argument put forward that as the population ages, maybe part-time jobs are what the older folks want? It can’t be that young folks want to have many jobs, with little or no benefits, can it?

Part-Time Jobs

The telling statement from the article is the following:

Despite little change in January, part-time employment was up on a year-over-year basis (+190,000 or +5.6%). In January, 19.6% of employed persons worked part time, compared with 18.8% the same month a year earlier.

Why a growing part-time work force ? This would be a very interesting report if I could find it somewhere.

Unemployment & Employment Graphs

Surprising job picture

Employment & Unemployment Seasonally Adjusted

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You Are Spending More

Stats Canada published a very interesting report last week, Survey of Household Spending, 2015, which on first read sounds obvious.

Canadian households spent an average of $60,516 on goods and services in 2015, up 2.5% from $59,057 in 2014.

If we remember inflation in 2015 ran at a slim 1.6%, which means that Canadians spending increased 0.9% (after adjusting for inflation).

Of this spending the breakdown of what we bought is fascinating as well:

  • Food 14.3%
  • Shelter 28.9%
  • Transportation 19.4%
  • Household operations, furnishings and equipment 10.9%
  • Clothing and Accessories 5.6%
  • Miscellaneous (?) 2.8%
  • Education & Reading Materials 3.0%
  • Alcohol, tobacco and games of chance 2.5%
  • Recreation 6.6%
  • Health and Personal Care 6.0%

Your Household Spending

Why is this of interest to you, and your personal finance plans? Do these numbers reflect your spending? Are you an average Canadian ? You don’t know? I think  you should. If you cannot compare how much you spend to these numbers, you are not in control of your finances.

The other thing is, that if you don’t have these numbers at hand, go with the assumption that you are close to these numbers. If you make that assumption, you can:

  • Start tracking your spending from this point (so you can figure out where you spend money)
  • Use these numbers to try to lower your overall spending

Some areas where you might try to lower your spending are hard to change (Shelter is the big one, it is very hard to lower your rent or mortgage (you can, but it is hard)).

Finding Savings in Data

In my opinion these areas scream out as being areas where you could start trimming spending:

  • Transportation, if you have a car, could you use public transit ? Can you afford your car? Insurance on your car?
  • Clothing and Accessories, this is an area where there are countless great web sites (e.g. Squawkfox) that can help you control your clothing spending.
  • Food , no I am not saying buy cheap food, but maybe going out for dinner is essential ?
  • Alcohol and games of chance, seriously? If you smoke, stop, and games of chance are not going to get it done either.

Those are a simple overview, I am sure if you looked closely and started tracking things, you’d find many more places to save money.

More Data is a Good Thing

Collect the data, however you like, but with more information comes a better understanding of where you are spending your money.

Neat Infographic From Stats Canada

Spending Infographic

Nifty Infographic

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Energy Up 4.0 % for 2016

Stats Canada on Friday published their year-end Consumer Priced Index. These numbers show us what kind of year 2016 was. The most interesting index increase is Canadians paid 4.0% more for Energy in 2016, and Ontarians had a ludicrous price jump for the price of electricity.

Overall the CPI (or inflation) year over year growth ending in December is 1.5%, which is still below the Bank of Canada’s barometer range (starting at 2.0%). This does not mean the B of C won’t raise interest rates, just that inflation won’t be the reason sited.

The Energy index includes Gasoline, Electricity and other essentials,  and as mentioned. For Ontarians Energy was particularly noticeable as Electricity is up 11.2% year over year ending in December. Yes, that is a double digit increase, so Inflation in Ontario year over year is actually 2.0%.

Prices by Category

By Category we can see the monthly changes in this graphic:

energy up

Transportation is big , note Energy is not mentioned here

Special Aggregate Table

This does show Energy, and you can see how Energy and Gasoline prices are up big year over year.

Relative importance December
2015
December
2016
December 2015 to December 2016
% (2002=100) (2002=100) % change
Special aggregates
All-items excluding energy 92.21 125.0 126.6 1.3
Energy 7.79 143.4 149.1 4.0
Gasoline 3.84 142.7 150.6 5.5
All-items excluding food and energy 75.80 121.3 123.5 1.8
Goods 46.68 116.3 117.4 0.9
Services 53.32 136.8 139.5 2.0

Detailed Highlights

From the CPI detailed report we can get a nice set of highlights about what cost more year over year.

 

Main contributors to the 12-month change in the CPI:

Main upward contributors:

  1. Gasoline (+5.5%)
  2. Homeowners’ replacement cost (+4.3%)
  3. Purchase of passenger vehicles (+2.6%)
  4. Food purchased from restaurants (+2.3%)
  5. Electricity (+3.6%)

Main downward contributors:

  1. Food purchased from stores (-2.8%)
  2. Children’s clothing (-4.5%)
  3. Video equipment (-5.8%)
  4. Travel tours (-1.6%)
  5. Mortgage interest cost (-0.3%)

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