September 12, 2013
A more realistic definition of inflation based on bills that arrive in the mail (Part 2)
Over the past 10 years, only Newfoundland and Labrador among the provinces has rung up a higher percentage increase in its power rate, +47.3% versus Ontario’s +46.6%.
The increase for Canada as a whole in the past decade has been +32.6%.
Going back five years, Ontario’s +30.5% rise in electric power prices has exceeded all other provinces by a considerable margin, with B.C. in second place at +24.5%.
The Canada-wide gain since June 2008 has been +16.8%.
In our increasingly high-tech world, full of computers and smart phones that require re-charging, there are some activities that absolutely require the use of electricity. Further moves to embrace a “green” agenda will intensify its usage. One only has to think of plug-in cars to conclude that continuing strong electricity demand is almost a sure thing.
The cost of Internet access services has also moved up more than the overall inflation rate, +3.2% year-over-year in this latest June. Telephone services were +1.6%, but many people are finding non-traditional ways (e.g., social media, FaceTime and Skype, etc.) to stay in touch.
Property taxes were +2.8% in June and householders’ home and mortgage insurance was +3.3%.
All of the aforementioned bill-paying items recorded higher year-over-year price increases than Canada’s overall CPI gain of +1.2%.
One alarming development is that along with the price increases, there seems to have been little improvement in the delivery of service. Two recent thunderstorms in the Toronto region knocked out power over extended periods of time for many residents.
As I’m key-punching this article, the power has just gone off. I’m operating on the back-up battery system. Okay, now it’s back on again. That was freaky.
Speaking of freaky, our utility problems are partly due to the bizarre weather patterns that have become common around the globe.
There’s also the uncomfortable thought that in many parts of the country, the standard of maintenance has fallen behind. What will happen to our utility bills when the public sector becomes more serious about recognizing shortfalls in the services it is providing?
Detroit is the “poster city” for infrastructure breakdowns. Nearly half of all street lighting is no longer functional. For a variety of reasons — e.g., a history of corruption at city hall and not just the auto sector’s slide in 2008-2009 — the city has fallen into mind-numbing decline. Its population has dropped by more than half to only 700,000 as hordes of people have packed up and moved away in search of better prospects elsewhere.
Detroit has become the largest U.S. city to ever seek bankruptcy protection.
During much of the middle portion of the last century, commerce was good, tax revenue rolled in and governments undertook all manner of public works projects. Nobody had to worry about the quality of new delivery systems.
But now, those water and sewage treatment plants, watermains, and power transmission lines have matured. Regular wear and tear has taken its toll.
Earlier this summer, over a million citizens of Montreal were inconvenienced by a boil-water advisory. Repairs at a west-end treatment plant lowered the reservoir level such that sedimentation discoloured the water emerging from taps and fountains around the city.
U.S. residents near Washington, D.C., were subjected to a similar scare. A shutdown of the water supply in Prince George County, Md., during the hottest week of the year was narrowly averted when officials found a way to work around a deteriorating watermain.
The frequency of these unfortunate instances is sure to grow and jury-rigged fixes are not the long-term solution.
Clothes purchases also offer a strikingly visible means to monitor prices.
This category has featured bargains over the last several years. Two factors have been playing particular roles — imports from countries with low labour costs and intense competition among retailers.
In June, the apparel sub-component index of the CPI was +0.8% in both Canada and the U.S.
The Canadian dollar has now fallen below parity with the U.S. greenback and that will exert some upward pressure on import prices going forward.
The tragic consequences of poor working conditions in low-wage nations have been making headlines, with the building collapse in Bangladesh that killed over 300 garment industry workers as the most shocking example. A much-needed push is underway to improve construction standards in emerging nations and provide more benefits for disadvantaged labour forces.
Many other price movements are buried — e.g., health care costs, if they’re largely included in a company medical plan. And durable goods purchases, such as for a new or used car, are usually staggered over a considerable time gap, removing the immediacy of the price change.
Let me leave you with one piece of good news. Statistics Canada says the cost of home entertainment equipment is -5.9% year-over-year.
The U.S. CPI report includes the observation that the price of televisions is -14.4% and personal computers and peripheral equipment, -10.3%.
As if it needed confirming, cocooning (i.e., staying at home for entertainment) is a clear antidote to a host of pressures on the wallet.