August 20, 2013
A more realistic definition of inflation based on bills that arrive in the mail (Part 1)
The official inflation rate in Canada in June was a low +1.2% year-over-year for the all-items Consumer Price Index (CPI) and +1.3% for the “core” rate, according to Statistics Canada.
The core rate omits eight often-volatile sub-components of the CPI, including fruit, vegetables and fossil fuels.
The comparable U.S. figures are strolling, not running, a little faster, +1.8% for “all items” and +1.6% ignoring food and energy, according to the Bureau of Labor Statistics.
Low inflation keeps central bankers “dovish” — that is to say, disinclined to raise interest rates. (When they want to raise yields, they’re said to be “hawkish”.)
The highlighted inflation rate may be low, but I would suggest average homeowners have a sense that prices are increasing faster than statisticians are claiming.
The often-cited “man or woman on Main Street” becomes especially attuned to prices in several ways. Probably first among these is the cost to fill up the family “chariot” at the gas pump.
A high proportion of the population needs to buy petrol to travel to work. Furthermore, many of us like our routines. There’s a certain day of the week when we “top up”, preferably before Friday when the price rises in anticipation of the weekend.
We know how far we can usually drive on a tank of gas. The week-to-week change in how much we’re “dinged” is easy to monitor.
In June, Canada’s year-over-year gasoline price change nation-wide was +4.6%. In the U.S., it was +2.8%. Both were higher than the overall price jumps in each nation.
Just to let you know, if you do take public transit, the year-over-year price increase on city bus and subway routes was +2.4% for Canada as a whole.
The weekly supermarket shopping bill is another quick and reliable source of cost data. The direction of food prices is readily apparent to most shoppers. What wife or husband doesn’t come home from grocery shopping to vent about this or that outrageous price hike that has just been inflicted on the unwary?
Or to brag about how he or she spotted a bargain and filled their shopping cart with boxes of a particular brand of cookies that only one person in the house has the iron-clad stomach or frayed taste buds to eat? Maybe I’m just projecting from what happens in the Carrick household.
In Canada, food prices in June were +1.2% year-over-year, with a couple of popular sub-items heading into the stratosphere: bread, +4.3%; eggs, +4.5%; fresh or frozen pork, +4.8%; oranges, +9.2%; apples, +12.1%; and tomatoes, +13.3%.
The food sub-component index of the U.S. CPI in June was similar to Canada’s at +1.4%.
Then there’s a category I personally find most informative and distressing. It’s based on monthly bill payments. Included here are property taxes, utilities and internet services.
I still like to receive these in the mail rather than have the money deducted automatically from my bank account, partly because it helps me stay alert to price increases.
In Statistics Canada’s latest CPI report, electricity was +2.2% year-over-year; water +6.6%; and natural gas, +11.3%.
Ontario used to derive a great deal of pride from being an electricity juggernaut. The province is home to the Sir Adam Beck hydroelectric facilities in Niagara Falls, as well as technologically-advanced heavy-water nuclear power plants scattered throughout the region.
The fumbling of new gas-fired power station construction (with two of them being relocated by Queen’s Park after initial ground-breakings), combined with the slow and costly switch to wind and solar generation, has caused the cost of electricity in the province to become a persistent headache for consumers and businesses alike.
over the past 10 years
Data source: Statistics Canada; Chart: Reed Construction Data - CanaData.