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Consumer prices rose 1.2% in the 12 months to December 2008

Consumer prices rose 1.2% in the 12 months to December 2008

Consumer prices rose 1.2% in the 12 months to December 2008, more slowly than the 2.0% increase in November. It was the smallest increase since January 2007 and reflected a sharp decline in the price of gasoline.

 

Chart 1

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Gasoline prices in December 2008 were 25.8% below levels in the same month the year before. This was the largest drop since the inception of the gasoline price index in 1949 and followed a 14.4% drop in pump prices in November.

Excluding gasoline, the Consumer Price Index (CPI) rose 2.6% in the 12 months to December, down slightly from the 2.8% increase in November.

The 12-month change in the CPI was also tempered by on-going price declines for purchasing and leasing passenger vehicles, women's clothing and fuel oil and other fuels.

The most significant upward contributor was mortgage interest cost, despite a recent decrease in mortgage interest rates. Increasing prices for natural gas and various food items, particularly fresh vegetables and bakery and cereal products, also put significant upward pressure on consumer prices in December.

On a seasonally adjusted monthly basis, consumer prices fell 0.4% from November to December, following the monthly declines of 0.3% in November and 0.6% in October. As in the previous months, December's decline reflected price decreases for transportation items, which far offset rising food costs.

12-month change: Steady increase in food prices

Of the eight major components in the CPI, five recorded increases in the 12 months to December: food, shelter, health and personal care, household operations, furnishings and equipment, and alcoholic beverages and tobacco products.

Chart 2

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Food prices increased 7.3% during the 12-month period, following a 7.4% increase in November. Excluding food, the CPI posted no change in the 12 months to December. This was the slowest pace registered for this index since November 2001.

The underlying factor for rising prices for food was sustained price increases for food purchased from stores. Prices for food purchased from stores rose 9.0% in December, identical to November's increase. The main contributor was a 26.9% increase in prices for fresh vegetable items, products which are largely imported.

Persistent price increases for bakery and cereal products (+12.4%) also contributed to rising prices for food purchased from stores.

Shelter costs remained the second largest contributor to the increase in the CPI, propelled by higher mortgage interest costs and natural gas prices. Shelter costs rose 3.5% in December, down from the 3.9% increase posted in November. The slowdown primarily reflected price declines for fuel oil and other fuels, as well as slower increases in mortgage interest costs.

While mortgage interest costs were up 6.4%, the pace of change has been slowing as a result of a slowdown in new housing prices and easing interest rates.

Natural gas prices rose 18.4% in December, following a 16.8% gain in November. The only components of shelter to decline were prices for fuel oil and other fuels (-13.5%) and tenants' insurance premiums (-0.4%).

Thanks primarily to the sharp 25.8% drop in gasoline prices, the transportation price index declined 6.1% in December. This was its second consecutive drop and the largest decline since the inception of the index in 1949.

Chart 3

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Also contributing to the drop in transportation costs was a 3.5% decline in prices for purchasing and leasing passenger vehicles, which followed a 2.7% decline in November. These declines were slightly offset by a 4.4% increase in prices for passenger vehicle insurance premiums and a 6.1% rise in air transportation prices.

The clothing and footwear price index continued its downward trend, falling 2.6% in December. Both men's and women's clothing and footwear components contributed to the drop.

Provinces: Prices drop in New Brunswick and Nova Scotia on a 12-month basis

Consumers in two Atlantic provinces witnessed an outright drop in consumer prices in the 12 months to December. In New Brunswick, average prices in December 2008 were 0.6% below levels in the same month a year earlier. In Nova Scotia, the 12-month decline was 0.2%.

This was the first time since October 2006 that the 12-month price change in any province fell into negative territory.

Chart 4

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In addition to the large drop in gasoline prices in these provinces, a second major contributor was a sharp decline in the 12-month price change of fuel oil and other fuels. These energy products are used in great intensity in home heating in Nova Scotia and New Brunswick.

Excluding energy, consumer prices rose by 1.9% in Nova Scotia and 1.8% in New Brunswick. These increases were much lower than the 2.6% national rate of change.

Among the provinces, consumer prices in Saskatchewan (+2.6%), Manitoba (+1.9%) and Alberta (+1.9%) advanced at the fastest pace.

The change in consumer prices during the past 12 months slowed in every province, reflecting falling gasoline prices. Gasoline price declines ranged from 29.9% in Prince Edward Island to 20.6% in British Columbia.

Most of the upward pressure in prices came from higher shelter and food costs. The main items driving this pressure were mortgage interest costs, energy products associated with housing, fresh vegetables and bakery and cereal items.

Inflation in the Bank of Canada's core index holds steady on a 12-month basis

The Bank of Canada's core index advanced 2.4% over the 12 months to December, identical to the rise in November. The main contributors to the increase in the core index were higher prices for bread, cereal products and meat products. Price declines for purchasing and leasing passenger vehicles remained the primary downward contributor.

The seasonally adjusted monthly core index posted no change from November to December, after rising 0.6% from October to November.

Annual 2008: Fastest average increase in prices since 2003

On average for 2008 as a whole, consumer prices increased 2.3%, slightly faster than the annual average increase of 2.2% in 2007. This was the fastest rate of change since the annual average increase of 2.8% in 2003.

Major contributors to the increase in 2008 were higher prices for food and energy products and mortgage interest costs. Tempering the increase were substantial declines in prices for passenger vehicles, clothing and footwear products and various electronic items.

For a more detailed analysis, consult the publication The Consumer Price Index.

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 2008 issue of The Consumer Price Index, Vol. 87, 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. See How to order products.

The January Consumer Price Index will be released on February 20.

For more information, or to enquire about the concepts, methods or data quality of this release, contact Client Services (toll-free 1-866-230-2248613-951-9606; fax: 613-951-2848; prices-prix@statcan.gc.ca), Prices Division.

Table 1

Consumer Price Index and major components1
  (2002=100)
  Relative importance2 December 2007 December 2008 November 2007 to November 2008 December 2007 to December 2008
  Unadjusted
        % change
All-items 100.003 112.0 113.3 2.0 1.2
Food 17.04 111.7 119.8 7.4 7.3
Shelter 26.62 119.2 123.4 3.9 3.5
Household operations, furnishings and equipment 11.10 103.5 105.5 2.1 1.9
Clothing and footwear 5.36 93.7 91.3 -2.4 -2.6
Transportation 19.88 117.5 110.3 -3.0 -6.1
Health and personal care 4.73 107.7 109.9 1.9 2.0
Recreation, education and reading 12.20 101.2 101.2 -0.1 0.0
Alcoholic beverages and tobacco products 3.07 126.2 128.7 1.6 2.0
All-items (1992=100)   133.3 134.9 2.0 1.2
Special aggregates          
Goods 48.78 107.4 106.5 0.5 -0.8
Services 51.22 116.5 120.1 3.3 3.1
All-items excluding food and energy 73.57 109.4 111.0 1.6 1.5
Energy 9.38 138.2 123.0 -4.2 -11.0
Core CPI4 82.71 110.0 112.6 2.4 2.4
The month-to-month percentage changes are available from the monthly publication The Consumer Price Index.
2005 CPI basket weights at April 2007 prices, Canada, effective May 2007. Detailed weights are available under the Documentation section of survey 2301 (www.statcan.gc.ca/imdb-bmdi/index-eng.htm).
Figures may not add up to 100% as a result of rounding.
The measure of the 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 the core CPI, please consult the Bank of Canada website (http://www.statcan.gc.ca/cgi-bin/relocate.cgi?l=E&loc=http://www.bankofcanada.ca/en/inflation/index.htm).

Table 2

Consumer Price Index by province, and for Whitehorse, Yellowknife and Iqaluit
  (2002=100)
  Relative importance1 December 2007 December 2008 November 2007 to November 2008 December 2007 to December 2008
  Unadjusted
        % change
Canada 100.002 112.0 113.3 2.0 1.2
Newfoundland and Labrador 1.27 111.8 113.1 2.4 1.2
Prince Edward Island 0.35 114.7 114.7 2.3 0.0
Nova Scotia 2.56 113.6 113.4 1.3 -0.2
New Brunswick 1.97 111.9 111.2 0.6 -0.6
Quebec 21.05 111.1 111.7 1.4 0.5
Ontario 41.22 111.1 112.8 2.1 1.5
Manitoba 3.06 110.9 113.0 2.7 1.9
Saskatchewan 2.64 112.9 115.8 3.2 2.6
Alberta 11.43 118.9 121.2 2.1 1.9
British Columbia 14.29 110.1 111.4 2.0 1.2
Whitehorse 0.06 110.6 113.9 3.5 3.0
Yellowknife 0.08 111.9 115.4 4.7 3.1
Iqaluit (Dec. 2002=100) 0.02 108.7 112.4 3.4 3.4
2005 CPI basket weights at April 2007 prices, Canada, effective May 2007. Detailed weights are available under the Documentation section of survey 2301 (www.statcan.gc.ca/imdb-bmdi/index-eng.htm).
Figures may not add up to 100% as a result of rounding.

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