Consumer prices rose 3.5% from August 2007 to August 2008

Consumer prices rose 3.5% from August 2007 to August 2008, largely driven by higher prices for gasoline. On a monthly basis, consumer prices after seasonal adjustment rose 0.2% from July to August 2008.

The 12-month increase in the Consumer Price Index (CPI) in August was the largest since the 12-month rate of growth of 4.2% in March 2003.

Gasoline prices rose 26.3% in August compared with the same month a year earlier. Prices for other energy components, such as natural gas and fuel oil and other fuels, also contributed significantly to the rise in consumer prices. Overall, energy prices rose 20.2% over the 12 months to August 2008.

The increase in the energy price index accounted for about half of the overall increase in the 12-month variation of the CPI in August. Excluding energy, the CPI rose 1.8% over the 12 months to August, up from the 1.6% 12-month rate of growth posted for July.

Driven by price increases for grain and bakery products, prices for food purchased from stores also contributed significantly to the change in the 12-month CPI in August.

Partially offsetting the impact of rising gasoline prices was a drop in prices to purchase and lease passenger vehicles.

The seasonally-adjusted monthly all-items CPI rose 0.2% from July to August 2008, after rising 0.3% in the previous period.

12-month change: Transportation, shelter and food continue to push up consumer prices

Of the eight major CPI components, transportation costs rose the most in the 12 months to August 2008, followed by price increases for shelter and food. The Canadian consumer faced on average a 5.8% rise in costs for transportation, largely the result of a 26.3% increase in prices for gasoline over the 12 months to August.

While gasoline prices continued to exert the strongest upward pressure on consumer prices in August, a 7.3% drop in prices to purchase and lease passenger vehicles over the 12 months to August helped to mitigate the rise in transportation costs.

August was the 14th consecutive month that prices to purchase and lease passenger vehicles declined on a 12-month basis. Consumers of new vehicles have benefited from competition between vehicle manufacturers.

Rising mortgage costs and prices for energy associated with housing, contributed significantly to the 5.3% 12-month advance in the shelter price index in August.

Over the 12 months to August, mortgage costs slowed to a growth rate of 8.1%, down from the 8.5% 12-month rate of growth posted for July. Easing new housing prices primarily accounted for the slowdown in mortgage costs.

A 12-month increase of 31.7% for natural gas prices and a 49.4% rise in prices for fuel oil and other fuels also contributed significantly to the rise in consumer prices and costs associated with shelter over the 12 months to August.

After rising at a 12-month rate of 3.7% in July, food prices rose 4.5% over the 12 months to August and continued to exert upward pressure on the CPI. Prices for food purchased from stores rose 5.2%, the largest 12-month rise since June 2001.

Prices for bakery and cereal products (+14.9%) continued to exert the strongest upward pressure on prices for food purchased from stores. Prices for bakery and cereal products have been trending upward since late 2007 and posted the largest increase since September 1981 in the 12 months to August.

Over the 12 months to August, a 9.2% rise in fresh vegetable prices also pushed up prices for food, partly the result of higher transportation costs related to fuel.

In contrast to prices for food purchased from stores, prices for food purchased from restaurants advanced by a more moderate 2.7% over the 12 months to August.

Continual price declines for clothing and footwear (-1.8%), due primarily to a drop in prices for women's clothing, helped to mitigate the rise in the 12-month CPI in August.

A marginal 0.6% 12-month rise in the recreation, education and reading index also helped to ease the rise in consumer prices over the 12 months to August. Continual price declines for electronic equipment and the purchase of recreational vehicles helped to offset rising prices for other recreation, education and reading goods and services.

Over the 12 months to August, an 11.6% price decline for computer equipment and supplies was the second most significant downward contributor on the CPI behind the drop in prices to purchase and lease new passenger vehicles.

The provinces: Consumer prices on the Prairies bounce back

On the Prairies, the rate of growth in consumer prices was faster in August than it was in July, particularly in Manitoba and Alberta. Consumers in the three most eastern provinces (Newfoundland and Labrador, Prince Edward Island and Nova Scotia), however, continued to face the highest rise in consumer prices over the 12 months to August.

In Manitoba, consumer prices advanced 3.4% over the 12 months to August, up from the 2.6% rise posted in July. After rising 3.5% over the 12 months to July, consumer prices in Alberta rose 4.0% over the 12 months to August.

The advance in consumer prices in Manitoba and Alberta between the 12-month variations reported in July and August was due primarily to increasing natural gas prices.

Higher consumer price increases in the three most eastern provinces were due primarily to strong gains in energy prices.

With the exception of Alberta, the most significant individual upward contributor on consumer prices in August came from higher prices for gasoline. The 12-month variation in the gasoline price index ranged from 30.7% in British Columbia to 21.6% in Saskatchewan.

In Alberta, it was a 73.7% 12-month rise in natural gas prices that contributed largely to rising consumer prices.

Lower prices to purchase and lease passenger vehicles were observed across the country and were the most significant individual downward contributor on the CPI for all provinces.

The 12-month variation of the Bank of Canada's core index makes a move

The Bank of Canada's core index advanced 1.7% over the 12 months to August, faster than the increases of 1.5% recorded over the four previous 12-month periods. Gasoline, mortgage costs, natural gas and fuel oil and other fuels accounted for the majority of the difference between the CPI and the Bank's core index movement of consumer prices.

The seasonally adjusted monthly core index advanced 0.3% from July to August, after advancing 0.1% from June to July.

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 August 2008 issue of The Consumer Price Index, Vol. 87, no. 8 (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 September Consumer Price Index will be released on October 24.

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.gc.ca), Prices Division.