Consumer prices rose by 2.4% in October

Consumer prices rose by 2.4% in October compared with the same month in 2006, a slightly slower rate of growth than the 2.5% posted in September.

Gasoline and the two main components of owned accommodation—mortgage interest cost and homeowners' replacement cost—were the primary sources of October's increase.

Excluding energy, the all-items index climbed 1.9% in the 12 months preceding October 2007, a slowdown from the 2.1% growth recorded in September. Lower prices for the purchase and leasing of passenger vehicles were the main factor behind the slowdown of this index.

The Bank of Canada's core index, used to monitor the inflation control target, increased by 1.8% between October 2006 and October 2007, a slowdown compared with the rate of 2.0% in September. This was the weakest growth of this index since June 2006. This slowdown was mainly the result of lower prices for the purchase and leasing of passenger vehicles.

Consumer prices fell by 0.3% in October compared with the preceding month. This decrease was primarily the result of lower gasoline prices. The core index was down 0.2% over that period. Significant downward pressure on both indexes came from lower prices for traveller accommodation (-8.8%), passenger vehicles (-1.4%) and women's clothing (-2.3%).

The all-items index excluding energy declined 0.1% between September and October, following a 0.2% growth between August and September.

Gasoline drives growth in year-over-year consumer prices for a second straight month

The upward pressure on consumer prices between October 2006 and October 2007 was driven by gasoline, as it was in September.

In October 2007, the price at the pump rose 13.5% compared with the same month in 2006, a change due largely to a drop in last year's gasoline prices.

Upward pressure from the cost of owned accommodation (+4.8%) continued in October, due mainly to the growth in mortgage interest cost, homeowners' replacement cost and property taxes.

Mortgage interest cost rose 6.7% in October compared with 6.4% in September. October's growth was the highest since June 1991. This upturn is more a reflection of increases in amounts borrowed because of higher new housing prices than of increases associated with the renewal of mortgage loans at higher rates.

The growth in homeowners' replacement costs (+5.0%) has been slowing for several months and is now in line with the changes observed at the start of 2006. This slowdown follows the change in the evolution of new housing prices. Homeowners' replacement cost represents the worn-out structural portion of housing and is estimated using new housing prices (excluding land).

Property taxes were up 3.8% in October compared with October 2006. Property tax hikes were higher in Newfoundland and Labrador (+8.8%) and in Alberta (+6.0%). In both provinces, tax rates fell but a re-assessment of properties led to an increase in the amounts paid. The only province in which residents paid less in property tax was Manitoba (-1.5%). Properties were not assessed in this province in 2007 and the amounts paid out in property tax credits for education rose.

Canadians also had to pay 3.0% more for restaurant meals in October 2007 compared with the same month last year. Higher prices for dairy products and certain meats contributed to the increase, along with the cumulative impact of higher minimum wages in almost all provinces and territories during the 12-month period.

A 2.4% price decrease for the purchase and leasing price of passenger vehicles was the main factor in dampening the rise in consumer prices. This decline was due mainly to an increase in discounts given by manufacturers on 2007 models. This index continued the downward trend that began in July 2007.

Prices for fresh vegetables went down 14.6% in October. A year-over-year drop of this magnitude had not occurred since June 1996. It follows on the heels of the 9.2% drop recorded in September.

A 13.8% decline in prices for computer equipment and supplies also moderated the advance in the all-items index. However, this decline was weaker than decreases observed during the first eight months of 2007.

CPI growth faster in the Atlantic provinces

Gasoline prices and mortgage interest cost were among the five main contributors to the rise in the all-items index in every province.

The 12-month change in the Consumer Price Index (CPI) accelerated in all Atlantic provinces, where higher gasoline prices were among the main contributors to the acceleration.

The rate of growth of the CPI surpassed the national average in Prince Edward Island (+3.1%) and New Brunswick (+3.3%), along with Alberta (+5.0%) and Saskatchewan (+3.6%). CPI growth remained stable in Saskatchewan, but increased slightly in Alberta in response to a surge in natural gas prices and property taxes.

The upward movement of consumer prices slowed substantially in Manitoba (+1.9%), mainly because gasoline prices did not rise as much in October as in September and property taxes fell 1.5%.

Monthly change: Gasoline drags consumer prices down between September and October 2007

Consumer prices fell 0.3% between September and October 2007, after posting growth of 0.2% in the previous month.

This turnaround stemmed mainly from changes in the variation in gasoline prices. On a monthly basis, gasoline prices fell 3.3% in October after a 0.8% rise between August and September.

The price of traveller accommodation also fell by 8.8% as the high season came to an end. This followed a comparable decline of 10.4% between September and October 2006.

A 2.3% decline in the price of women's clothing also had a significant dampening effect on the all-items index. Lower prices stemmed from specials at several retailers.

The downward movement in these areas was partially offset by increases in other components, including property taxes, which were up 3.8%. Since the change in this component is only calculated annually it has a significant impact on the monthly index.

A 0.8% gain in mortgage interest cost also played a large role, a pace unchanged from last month. The rise in new housing prices had a greater impact than the renewal of mortgage loans at higher interest rates in October.

The 3.3% increase in natural gas prices also moderated the drop in the all-items index.

Available on CANSIM: tables 326-0009, 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 October 2007 issue of the Consumer Price Index, Vol. 86, no. 10 (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 our products.

The November Consumer Price Index will be released on December 18.

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.