Dec. 18, 2007
The latest inflation data from Statistics Canada reveals that core inflation excluding energy costs, certain imported food costs and mortgage interest costs fell from an annual rate of 1.8 % to just 1.6% this past November. This follows monthly declines that beginning in August saw the rate drop to 2.2 % in August, 2.0 % in September, 1.8 5 in October and now 1.6 % in November.Overall since August the rate of core inflation has fallen by almost a third.
Clearly there is absolutely no reason for the Bank of Canada to raise rates and further rate cuts starting in January should be expected as the Fed prepares to cut their rates further. The current boom in world commodity prices is a factor that the Bank has absolutely no control over and therefore there is no reason to raise rates on account of this other trend. Even here it is possible that with the recent announcement of increased supplies from OPEC that prices may have peaked and we might be in for some welcome price declines in this area in the coming months.
The report is reproduced below courtesy of Statistics Canada
Tuesday, December 18, 2007
Consumer Price Index
November 2007Previous releaseFuelled by higher gasoline prices and mortgage interest cost, consumer prices increased 2.5% between November 2006 and November 2007, a slight acceleration from the 12-month change of 2.4% posted in October.
However, the Bank of Canada's core index, used to monitor the inflation control target, rose only 1.6%, posting its slowest 12-month increase since April 2006.
The core index has decelerated since July 2007. The 12-month change was 2.2% in August, 2.0% in September and 1.8% in October.
The gap between the rate of growth in the all-items Consumer Price Index (CPI) and the core index is attributable to gasoline and mortgage interest cost, two components that pushed up the all-items CPI but which are not accounted for in the core measure.
Gasoline prices were 17.6% higher in November 2007 compared with the same month in 2006. This growth was partially due to a drop in prices around this time in 2006 and a 4.0% increase in gasoline prices between October and November 2007. The monthly increase partially reflects the higher price of crude oil on the global market.
Consumer prices rose 0.3% between October and November 2007 after declining 0.3% during the previous month. This reversal was due mainly to movements in gasoline prices, which increased 4.0% between October and November following a 3.3% decline during the previous month.
The core index remained unchanged between October and November following a 0.2% decline posted in October.
Twelve-month change: Large increase in gasoline prices
November's 12-month change of 2.5% in the all-items CPI was higher than the 2.1% average 12-month increase since the beginning of 2007.
November's growth rate was mainly driven by a 17.6% increase in the price of gasoline in November 2007 compared with November 2006. This was the most significant annual growth recorded since May 2006, when gasoline prices rose 18.6%.
Gasoline has been the dominant factor in the annual growth in the all-items index since September. This growth was partially due to a drop in prices around this time in 2006 as well as a 4.0% increase in gasoline prices between October and November 2007. The month-to-month increase partly reflects the higher price of crude oil on the global market.
Other factors contributing to the 12-month increase in the all-items index in November included mortgage interest cost, homeowners' replacement cost and restaurant meals.
Costs associated with owned accommodation (+5.1%) once again played an important role in the rise of the all-items index over the 12 months preceding November 2007. The two main components of the owned accommodation index are the cost of financing the purchase of a house (mortgage interest cost index) and the cost of maintaining the housing structure from wear and tear (homeowner's replacement cost index).
The mortgage interest cost index advanced 7.0% during this period, up from the 6.7% growth posted in October. The 4.9% annual increase in homeowners' replacement cost also contributed to the rise in costs for owned accommodation. The pace of growth of this component continued to slow down in line with changes in new housing prices.
Canadians paid 2.4% more for restaurant meals in November compared with November 2006. Although this item is a major contributor to the growth in consumer prices, the increase was the most moderate since June 2007.
Among the factors dampening the 12-month increase in consumer prices were declines in prices for vehicle purchase and leasing, fresh vegetables and fruits and computer equipment.
The main factor was a 3.9% drop in the price to purchase and lease vehicles. November was marked by the introduction of 2008 models and the fact that manufacturers continued to offer rebates on many new 2008 models. This was the largest 12-month decrease on record.
Prices for fresh vegetables fell 11.1% on the heels of a 14.6% drop posted in October. Canadians also enjoyed a 6.2% decline in prices for fresh fruits, mainly thanks to lower prices for oranges.
Prices for computer equipment and supplies declined 14.9% in November in the wake of lower prices for desktops and laptops.
Provinces: Consumer price growth cools in Alberta
Between November 2006 and November 2007, consumer prices increased at rates faster than the national average in five provinces: Prince Edward Island (+2.9%), Nova Scotia (+2.8%), New Brunswick (+3.2%), Saskatchewan (+4.0%) and Alberta (+4.7%).
Gasoline prices were the main contributor to CPI growth in all provinces except Saskatchewan and Alberta, where they were second to owned accommodation costs.
The year-over-year growth in the price of gasoline accelerated in November in all provinces. The increase was especially steep in Nova Scotia, where it reached 19.6% in November compared with 12.2% in October.
The growth in consumer prices slowed in Alberta, where the 12-month increase in November was 4.7% compared with 5.0% in October. This was due mainly to natural gas prices, which fell 3.2% in November after increasing 16.0% in October.
Monthly change: Gasoline reverses change in the all-items index
Consumer prices were up 0.3% between October and November 2007 following a 0.3% decline the previous month. This reversal stems mainly from changes in gasoline prices (+4.0%).
A 0.8% increase in mortgage interest cost also contributed to growth in the all-items index. This component has continued to grow at a monthly rate between 0.7% and 0.8% since July 2007. Mortgage loan renewals at higher rates contributed to the growth in this component almost as much as increasing new housing prices.
The price of bakery products increased by 3.8% as world wheat prices held at record levels. Canadians paid 4.5% more for their fresh vegetables in November compared with October.
With the onset of winter, the price of fuel oil and other fuels grew by 4.7%, the steepest rise of this component since September 2005, when Hurricane Katrina affected the petroleum industry.
The impact of these increases was partly offset by traveller accommodation prices, which fell 5.5%, and the price of electricity, which was down 1.6%. The decline in electricity prices occurred mainly in Ontario, where the winter rate schedule took effect on November 1. Ontario residents enjoyed a lower rate on their first 1 000 kWh/month of consumption, whereas this lower rate applied to the first 600 kWh/month in October.
Natural gas prices fell 2.9% as mild weather contributed to low demand and stocks were high. Prices of women's clothing were down 1.3% as retailers began discounting winter apparel.
Available on CANSIM: tables 326-0009, 326-0012, 326-0015 and 326-0020 to 326-0022.
Definitions, data sources and methods: survey number 2301.
More information about the concepts and use of the CPI are also available online in Your Guide to the Consumer Price Index (62-557-XIB, free), now available from the Publications module of our website.
The November 2007 issue of the Consumer Price Index, Vol. 86, no. 11 (62-001-XWE, free), is now available from the Publications module of our website. A paper copy is also available (62-001-XPE, $12/$111). A more detailed analysis of the CPI is available in this publication.
The December 2007 Consumer Price Index will be released on January 25, 2008.
For more information or to enquire about the concepts, methods or data quality of this release, call Client Services (toll-free 1-866-230-2248; 613-951-9606; fax 613-951-1539; prices-prix@statcan.ca), Prices Division.
Consumer Price Index and major components
(2002=100)
Relative importance1 November 2007 October 2007 November 2006 October to November 2007 November 2006 to November 2007
Unadjusted
% change
All-items 100.002 111.9 111.6 109.2 0.3 2.5
Food 17.04 111.3 110.7 110.1 0.5 1.1
Shelter 26.62 118.8 118.7 114.1 0.1 4.1
Household operations and furnishings 11.10 103.3 103.4 102.2 -0.1 1.1
Clothing and footwear 5.36 96.4 97.1 97.0 -0.7 -0.6
Transportation 19.88 116.7 115.2 112.7 1.3 3.5
Health and personal care 4.73 108.0 107.5 106.7 0.5 1.2
Recreation, education and reading 12.20 102.0 102.7 100.5 -0.7 1.5
Alcoholic beverages and tobacco products 3.07 126.5 126.3 122.3 0.2 3.4
All-items (1992=100) 133.2 132.9 130.0 0.2 2.5
Special aggregates
Goods 48.78 107.6 107.1 106.1 0.5 1.4
Services 51.22 116.2 116.1 112.4 0.1 3.4
All-items excluding food and energy 73.57 109.6 109.6 107.7 0.0 1.8
Energy 9.38 136.5 134.5 123.8 1.5 10.3
Core Consumer Price Index3 82.71 110.3 110.3 108.6 0.0 1.6
1. 2005 CPI basket weights at April 2007 prices, Canada - Effective May 2007. Detailed weights are available under the Documentation section of survey 2301 at (www.statcan.ca/english/sdds).
2. Figures may not add up to 100% due to 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, please consult the Bank of Canada Web site (www.bankofcanada.ca/en/inflation).
Consumer Price Index by province, and for Whitehorse, Yellowknife and Iqaluit1
(2002=100)
November 2007 October 2007 November 2006 October to November 2007 November 2006 to November 2007
Unadjusted
% change
Newfoundland and Labrador 111.6 111.2 109.1 0.4 2.3
Prince Edward Island 114.3 114.1 111.1 0.2 2.9
Nova Scotia 113.5 112.6 110.4 0.8 2.8
New Brunswick 111.9 111.4 108.4 0.4 3.2
Québec 110.8 110.5 108.6 0.3 2.0
Ontario 111.2 110.9 108.6 0.3 2.4
Manitoba 110.8 111.0 109.0 -0.2 1.7
Saskatchewan 113.1 113.0 108.8 0.1 4.0
Alberta 119.1 118.6 113.7 0.4 4.7
British Columbia 110.1 110.0 108.7 0.1 1.3
Whitehorse 110.7 110.4 106.3 0.3 4.1
Yellowknife2 110.9 111.1 107.6 -0.2 3.1
Iqaluit (Dec. 2002=100) 108.2 108.1 105.2 0.1 2.9
1. View the geographical details for the city of Whitehorse, the city of Yellowknife and the town of Iqaluit.
2. Part of the increase first recorded in the shelter index for Yellowknife for December 2004 inadvertently reflected rent increases that actually occurred earlier. As a result, the change in the shelter index was overstated in December 2004, and was understated in the previous two years. The shelter index series for Yellowknife has been corrected from December 2002. In addition, the Yellowknife All-items CPI and some Yellowknife special aggregate index series have also changed. Data for Canada and all other provinces and territories were not affected.
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