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Consumer prices increased 2.4% between December 2006 and December 2007

Consumer prices increased 2.4% between December 2006 and December 2007

Consumer prices increased 2.4% between December 2006 and December 2007, a slight deceleration from the 12-month change of 2.5% posted in November.

Again this month, higher gasoline prices and mortgage interest costs were the main factors driving the increase.

 

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The Bank of Canada's core index, which is used to monitor the inflation control target, rose by only 1.5% in December, the sixth consecutive month in which the index has decelerated. It was the slowest 12-month change in the core index since December 2005.

In December, the strongest upward pressure on the 12-month change in the core index came from homeowners' replacement cost (+4.4%). The decline of prices for motor vehicles (-4.1%) partially offset the impact of this upward pressure.

On a monthly basis, consumer prices edged up 0.1% between November and December after climbing 0.3% during the previous period. The main factor was a deceleration in gasoline prices, which rose only 1.7% in December, a much slower pace than the 4.0% increase recorded the month before.


Note to readers

A preview of the upcoming changes in the Consumer Price Index program

Statistics Canada makes every effort to maintain and improve the quality of the Consumer Price Index (CPI) with the goal of facilitating the analysis of inflation, providing relevant and timely information to the public, and enhancing the reliability of consumer price measures.

Concepts and methods underlying the CPI conform to the best international practices. They are regularly reviewed and updated to ensure that they accurately reflect changes in the economic environment, in technology and in consumer behaviour.

Data sources are also subject to the same kind of review. For example, the CPI basket of goods and services was updated recently to reflect changes in consumer preferences.

In this context, Statistics Canada is announcing plans to enhance several components of the CPI program over the next two years, including home insurance, airfares, Internet service provision, tuition fees, school textbooks, housing, etc. These reviews will be announced and implemented as they occur over the next couple of years.


The core index declined 0.3% between November and December after remaining unchanged the previous period. A decline in clothing prices exerted strong downward pressure.

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12-month change: Another strong increase in gasoline prices

Gasoline prices again were the main factor behind the 2.4% increase in the 12-month change in the all-items index. Prices at the pump rose 14.9% between December 2006 and December 2007. However, this gain was more moderate than the 12-month change of 17.6% posted during the previous period and consequently had a dampening effect on the all-items index.

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Excluding gasoline prices, the all-items index increased only 1.7% during the past 12 months, a growth rate unchanged from November.

The rise in gasoline prices coincided with a significant increase in crude oil prices on international markets. Gasoline prices represent 4.9% of the current Consumer Price Index (CPI) basket. They have accounted for a substantial share of the growth in consumer prices since September, reflecting the significant fluctuations in gasoline prices at the pump.

Consumers also paid 27.1% more for heating oil in December 2007 than in December 2006, the biggest increase since October 2005. Higher crude oil prices, falling temperatures and low inventories appeared to have had a combined impact.

Also exerting significant upward pressure on the all-items index were mortgage interest costs, which rose 7.3% in the 12 months preceding December. This was slightly faster than the 7.0% advance in November.

A 4.4% increase in homeowners' replacement cost, which represents the cost of maintaining a housing structure, was also a contributing factor. This component has been decelerating since July 2007. December's increase was the slowest recorded since April 2002.

Over the last six months, the slowdown in homeowners' replacement cost has been especially pronounced in Alberta. In December 2007, this cost rose only 9.0% for Albertans, well below the record gain of 48.6% in September 2006.

In December, Canadians paid 2.7% more for food purchased from restaurants compared with the same month in the previous year. The increase in the price of food they purchased from grocery stores was only 1.1% for the same period. Much of this increase was attributable to the 4.6% rise in bakery product prices, reflecting the sharp rise of the price of wheat on international markets.

A 4.1% decrease in the price for the purchase and lease of motor vehicles mitigated the rise in consumer prices. The particularly strong declines during the past two months were attributable to a continuation of discounts on new 2008 models. Consumers paid relatively less for a number of 2008 models, compared with the price they paid for 2007 models during the same period in 2006.

Lower prices for fresh fruit (-7.2%) and fresh vegetables (-4.7%) played a large role in dampening the rise of food prices. Declines for oranges (-15.8%) and apples (-13.1%) were especially pronounced.

Canadians also enjoyed a 13.7% reduction in prices for computer equipment and supplies and paid 8.0% less for video equipment, thanks to new technologies. The pronounced drop in prices for liquid crystal display (LCD) screens and for laptop computers contributed to these declines.

The price of books and other printed material (excluding textbooks) fell 7.7%. Declines occurred in every province except in Quebec, where the price of this component rose 7.2% and where the market for books differs.

The provinces: Biggest slowdowns in consumer prices posted in Alberta and Saskatchewan

On a provincial basis, consumer prices decelerated in Alberta, where the 12-month increase was 4.1% in December compared with 4.7% in November. This slowdown can largely be explained by a 12.5% decline in natural gas prices in December following a 3.2% drop in November.

In Saskatchewan, the increase in consumer prices was 3.7% in December compared with 4.0% in November. A slowdown in homeowners' replacement cost contributed to the deceleration in consumer prices in Saskatchewan. The 12-month increase in homeowners' replacement cost slowed to 41.9% in December, down from the 43.7% rise reported in November. This component exerted the strongest upward pressure.

The 12-month increase in consumer prices of 1.2% in British Columbia was the weakest observed since October 2006. Gasoline prices there rose only 6.3%, the slowest gain of any province.

The fastest accelerations in the CPI occurred in Manitoba, where prices in December were up 2.0% compared with 1.7% in November, and in Nova Scotia, where the growth rate rose from 2.8% to 3.1%. In both provinces, the main contributor was a substantial increase in gasoline prices, which rose 16.2% in Manitoba and 14.7% in Nova Scotia.

Monthly change: Gasoline slows the rise in the all-items index

The rise in gasoline prices slowed down from 4.0% between October and November to 1.7% between November and December. This deceleration helped slow the increase in the all-items index from 0.3% in November to 0.1% in December. However, gasoline prices were still the main contributor to the monthly increase.

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The second main contributor was a 6.2% increase in prices for air transportation. This component generally rises during this period in the year, but December's rise was the fastest since December 2003. It was mainly attributable to higher prices for transatlantic flights and flights to Asia and the Pacific.

Elsewhere, consumers spent 6.2% more for their fresh vegetables, a typical increase for winter months. The increase in mortgage interest costs remained at 0.8% for the fourth month in a row.

Prices for heating oil and other fuels jumped 9.9%, the fastest monthly growth since September 2005, when Hurricane Katrina disrupted activity in this sector.

Partly offsetting these increases were a 4.7% decline in women's clothing prices and a 3.2% decline in men's, a 2.4% decrease in the cost of traveller accommodation, and a 9.0% decline in the price of books and other printed material (excluding textbooks).

Prices for video equipment continued their downward trend, falling 3.8% between November and December, likely the result of Christmas specials.

Annual change: Consumer prices rise 2.2% in 2007

This release provides the annual average movement in components of the CPI for 2007 as a whole. Annual average indexes are calculated by averaging index levels over the 12 months of the calendar year.

Annual averages should not be confused with the 12-month change in the CPI. This compares indexes for a given month to indexes for the same month a year earlier.

For 2007 as a whole, prices rose on average by 2.2%, compared with 2.0% in 2006. The increase in 2003 (+2.8%) was the biggest annual increase since 1991.

Impact of decline in Goods and Services Tax (GST)

Since the price changes measured by the CPI take into account the value of the consumption taxes paid by Canadians, the one percentage point decrease in the GST announced by the government to take effect in January will have an impact on the CPI in that month.

A rough estimation of this impact is that the rate of change would be lower by 0.6% than it otherwise would have been if the entire amount of the decrease were transferred to consumers through lower prices. To the extent that businesses raise their margins at the same time the impact could be correspondingly less. Also, if some businesses had already reduced their prices in anticipation of the coming GST reduction (e.g. car dealers), the impact in January would also be less.

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) from the Publications module of our website.

The December 2007 issue of the Consumer Price Index, Vol. 86, no. 12 (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 January 2008 Consumer Price Index will be released on February 19.

For more information or to enquire about the concepts, methods or data quality of this release, call Client Services (toll-free 1-866-230-2248613-951-9606; fax: 613-951-1539; prices-prix@statcan.ca), Prices Division.

Consumer Price Index and major components

(2002=100)

  Relative importance1 December 2007 November 2007 December 2006 November to December 2007 December 2006 to December 2007
    Unadjusted
          % change
All-items 100.002 112.0 111.9 109.4 0.1 2.4
Food 17.04 111.7 111.3 109.9 0.4 1.6
Shelter 26.62 119.2 118.8 114.6 0.3 4.0
Household operations and furnishings 11.10 103.5 103.3 102.2 0.2 1.3
Clothing and footwear 5.36 93.7 96.4 93.5 -2.8 0.2
Transportation 19.88 117.5 116.7 114.1 0.7 3.0
Health and personal care 4.73 107.7 108.0 106.3 -0.3 1.3
Recreation, education and reading 12.20 101.2 102.0 100.1 -0.8 1.1
Alcoholic beverages and tobacco products 3.07 126.2 126.5 123.2 -0.2 2.4
All-items (1992=100)   133.3 133.2 130.2 0.1 2.4
Special aggregates            
Goods 48.78 107.4 107.6 106.1 -0.2 1.2
Services 51.22 116.5 116.2 112.6 0.3 3.5
All-items excluding food and energy 73.57 109.4 109.6 107.6 -0.2 1.7
Energy 9.38 138.2 136.5 127.1 1.2 8.7
Core Consumer Price Index (CPI)3 82.71 110.0 110.3 108.4 -0.3 1.5
1. 2005 CPI basket weights at April 2007 prices, Canada, effective May 2007. Detailed weights are available under the Documentation section of survey 2301 (http://www.statcan.ca/english/sdds/index.htm).
2. Figures may not add up 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.statcan.ca/cgi-bin/relocate.cgi?l=E&loc=http://www.bankofcanada.ca/en/inflation/index.htm).

Consumer Price Index by province, and for Whitehorse, Yellowknife and Iqaluit1

(2002=100)

  December 2007 November 2007 December 2006 November to December 2007 December 2006 to December 2007
  Unadjusted
        % change
Newfoundland and Labrador 111.8 111.6 109.3 0.2 2.3
Prince Edward Island 114.7 114.3 111.6 0.3 2.8
Nova Scotia 113.6 113.5 110.2 0.1 3.1
New Brunswick 111.9 111.9 109.1 0.0 2.6
Quebec 111.1 110.8 108.7 0.3 2.2
Ontario 111.1 111.2 108.8 -0.1 2.1
Manitoba 110.9 110.8 108.7 0.1 2.0
Saskatchewan 112.9 113.1 108.9 -0.2 3.7
Alberta 118.9 119.1 114.2 -0.2 4.1
British Columbia 110.1 110.1 108.8 0.0 1.2
Whitehorse 110.6 110.7 106.3 -0.1 4.0
Yellowknife2 111.9 110.9 108.4 0.9 3.2
Iqaluit (Dec. 2002=100) 108.7 108.2 105.7 0.5 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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Québec Landlords Association (1)

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