Tuesday, February 20, 2007

Consumer Price Index

Consumers paid 1.2% more for the goods and services they purchased between January 2006 and January 2007, a somewhat slower pace than the one of 1.6% in December.

Lower gasoline prices helped offset the impact of rising housing costs and slowed the increase in the all-items Consumer Price Index (CPI). The increase remained below 2.0% for a fifth consecutive month.

Excluding energy, the all-items index rose 1.8% in January 2007 compared with January 2006, up marginally from the 1.7% increase posted in the previous month.

The core CPI, used by the Bank of Canada to monitor its inflation-control target, rose by 2.1% between January 2006 and January 2007, following a 2.0% increase in December.

On a monthly basis, the all-items index edged up 0.1% in January 2007, following two consecutive monthly gains of 0.2%.

Also on a monthly basis, the all-items index excluding energy increased 0.2%, after a drop of 0.1% in December. The core index followed suit, rising 0.1%, compared to December's 0.2% decline.

In January, Statistics Canada announced a major update of the CPI to reflect changes in the spending patterns of Canadian households. This update, which will occur on June 19, 2007, is designed to ensure the CPI's reliability as a measure of inflation, a statistical series deflator and a tool for indexing various payments and transfers. For more information, consult the article released in The Daily on January 23, 2007 entitled: "Consumer Price Index: A preview of the upcoming basket update".

The 12-month change: Continued upward pressure from higher housing costs

The 12-month change in the all-items index again grew at the fastest pace in Alberta. Prices there rose 3.9% on average in January 2007 compared with January 2006. However, this was a slower rate of growth than the 12-month gain of 4.7% posted in December 2006.

The 12-month change in the all-items index also surpassed the national average in January 2007 in British Columbia, Manitoba and Saskatchewan. Ontario, Quebec and the Atlantic Provinces posted gains below the national all-items CPI.

Nationally, the continued pressure of prices in the owned accommodation sector remained the key factor in the 12-month increase in the all-items CPI in January. This sector includes mortgage interest cost and homeowner's replacement cost. However, those gains were mitigated by declines in the price of gasoline and natural gas.

The 12-month rise in mortgage interest cost continued the upward climb begun in 2006, reaching 5.1% in January 2007. This was a slight increase from the 4.9% growth posted in the previous month.

The growth in the homeowner's replacement cost index, which represents the worn-out structural portion of housing and is estimated using new housing prices (excluding land), slowed somewhat. Prices rose only 7.6% between January 2006 and January 2007 after two consecutive months of 8.2% growth. The 12-month increase had reached a high of 8.8% in September and October 2006 before starting to ease off in November 2006.

The dizzying surge in homeowner's replacement cost in Alberta has slowly abated since September 2006, when the 12-month change reached a record high of 48.6%. Nonetheless, in January 2007, this index rose by 37.1% in Alberta, with Saskatchewan trailing far behind with an increase of 13.5%. Elsewhere in Canada, this index posted somewhat smaller increases.

The increase in the price of food purchased in restaurants, cigarettes and electricity also contributed to the 12-month hike in the all-items index.

All Canadian drivers, except those in British Columbia, enjoyed a drop in gasoline prices between January 2006 and January 2007. The price of gasoline fell 7.6% on average across Canada compared to January 2006.

This decline was attributable to the fact that prices in January 2007 are being compared to those in January 2006, when they had taken a 19.2% leap mainly because of the unstable international geopolitical situation.

The largest declines in gasoline prices occurred in Ontario, New Brunswick and Quebec. Drivers in British Columbia paid 6.4% more for gasoline in January than a year earlier.

A decline in natural gas prices also reduced energy costs in January. On a 12-month basis, the price of natural gas plummeted by 21.5%. This was the largest decrease since September 2002, and came on the heels of six consecutive declines. Seasonal temperatures and high stocks of this energy component kept natural gas prices low in January 2007.

Natural gas prices fell across the country, but declines in Ontario and Alberta were especially significant.

Lower prices for purchasing and leasing vehicles, fresh vegetables and computer equipment and supplies also exerted downward pressure on the all-items index in January 2007.

Month-over-month: Declines in gasoline prices slow down the monthly index growth

Monthly increases in the price of fresh vegetables, women's clothing and non-alcoholic beverages were almost entirely offset by declines in the price of gasoline and travel tours between December 2006 and January 2007.

The price of fresh vegetables rose by 7.0% in January. The increase in the price of potatoes, carrots, onions, mushrooms and broccoli, among others, pushed up this index. Seasonal effects, which are normally observed in January, contributed to the higher prices.

After three uninterrupted months of decline, the price of women's clothing jumped 3.9% in January. This increase indicated a return to normal prices after the termination of discounts on women's lines in effect since October 2006.

The price of non-alcoholic beverages rose by 7.2% between December 2006 and January 2007, consistent with historical trends. This followed price declines in the previous month that reflected holiday promotions.

The price of gasoline fell 3.1% between December and January, exerting a strong downward pull on the all-items CPI, mainly in Ontario and Quebec. Consumers in the provinces west of Manitoba and those in New Brunswick had to pay slightly more to fill their vehicles in January.

Canadians are more inclined to purchase travel tours in the first three months of the year, so the CPI records these prices for January, February and March.

This year, the price of package travel tours fell by 11.2% in January compared to March of the previous year. Prices fell in every province in January, with declines ranging from 12.9% in Ontario to 3.7% in Manitoba. The index normally falls in January when the demand for travel tours is at its lowest in the high season.

To a lesser extent, the price of air transportation, sports and athletic equipment and natural gas also had a moderating impact on the all-items CPI between December and January.

Available on CANSIM: tables 326-0001, 326-0002, 326-0009, 326-0012 and 326-0015 to 326-0018.

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) from the Publications module of our website.

Available at 7 a.m. online under The Daily module of our website.

The January 2007 issue of the Consumer Price Index, Vol. 86, no. 1 (62-001-XWB, free) is now available from the Publications module of our website. A paper copy is also available (62-001-XPB, $12/$111). A more detailed analysis of the CPI is available in this publication.

The February 2007 Consumer Price Index will be released on March 20.

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
(1992=100)
	Relative importance1	January 2007	December 2006	January 2006	December 2006 to January 2007	January 2006 to January 2007
		Unadjusted
					% change
All-items	100.002	130.3	130.2	128.8	0.1	1.2
Food	16.89	133.5	132.2	130.4	1.0	2.4
Shelter	26.75	130.7	130.5	127.2	0.2	2.8
Household operations and furnishings	10.58	116.5	116.3	116.4	0.2	0.1
Clothing and footwear	5.37	99.1	98.4	99.0	0.7	0.1
Transportation	19.79	152.3	153.4	154.2	-0.7	-1.2
Health and personal care	4.52	122.7	122.7	121.3	0.0	1.2
Recreation, education and reading	11.96	125.4	126.5	125.2	-0.9	0.2
Alcoholic beverages and tobacco products	4.13	153.5	152.2	148.3	0.9	3.5
All-items (1986=100)		166.9
Purchasing power of the consumer dollar expressed in cents, compared to 1992		76.7	76.8	77.6
Special aggregates
Goods	48.84	123.0	122.8	124.2	0.2	-1.0
Services	51.16	138.2	138.3	134.1	-0.1	3.1
All-items excluding food and energy	74.27	126.4	126.4	124.3	0.0	1.7
Energy	8.84	162.2	164.8	171.9	-1.6	-5.6
Core CPI3	82.75	129.9	129.8	127.2	0.1	2.1
1. 2001 CPI basket weights at June 2004 prices, Canada : Effective July 2004. Detailed weights are available under the Documentation section of survey 2301 at (http://www.statcan.ca/english/sdds/index.htm). 2. Figures may not add to 100% due to rounding. 3. The measure of Core 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 website (http://www.bankofcanada.ca/en/inflation/index.htm).

Consumer Price Index by province, and for Whitehorse, Yellowknife and Iqaluit1
(1992=100)
	January 2007	December 2006	January 2006	December 2006 to January 2007	January 2006 to January 2007
	Unadjusted
				% change
Newfoundland and Labrador	128.5	128.1	127.1	0.3	1.1
Prince Edward Island	131.2	131.3	129.8	-0.1	1.1
Nova Scotia	131.8	131.9	130.9	-0.1	0.7
New Brunswick	129.5	129.4	129.1	0.1	0.3
Quebec	125.7	125.5	124.9	0.2	0.6
Ontario	130.4	130.6	130.0	-0.2	0.3
Manitoba	134.3	133.7	132.1	0.4	1.7
Saskatchewan	135.4	134.6	133.5	0.6	1.4
Alberta	142.4	141.8	137.1	0.4	3.9
British Columbia	128.4	128.3	125.6	0.1	2.2
Whitehorse	125.9	125.1	125.1	0.6	0.6
Yellowknife2	126.7	126.1	124.9	0.5	1.4
Iqaluit (Dec. 2002=100)	106.4	105.7	103.5	0.7	2.8
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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