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The Daily

Tuesday, June 19, 2007
May 2007

Consumer prices increased 2.2% on average in May 2007 compared with May 2006, identical to the 12-month change in April.

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The upward pressure came largely from increases in the costs associated with owned accommodation, as well as higher gasoline prices. These were partially offset by a decline in the price of natural gas.

The 12-month change in the all-items Consumer Price Index (CPI) without energy components was 2.1% in May, compared with a 2.3% advance posted in April. This index posted increases above 2.0% for the past four months.

Note to readers

Effective today, Statistics Canada has updated the Consumer Price Index (CPI) to reflect changes in the spending patterns of Canadian households.

The update, which occurs periodically, is designed to ensure the CPI's reliability for three key purposes: a measure of inflation, a statistical series deflator, and a tool for indexing various payments and transfers.

With this updated basket, the 12-month change in the all-items index was 0.1 percentage points higher than its movement would have been based on the 2001 basket. This increase reflects the updating of weights and the introduction of new goods and services into the CPI.

The weights of various items in the basket of goods and services used to calculate the index have been updated from 2001 to 2005. In addition, the CPI base year (the period for which the value 100 is assigned to the index) has changed from 1992 to 2002.

The base period 1992=100 will continue to be available for the all-items index level. The CPI with the base period 1986=100 will be discontinued.

Users should note that the changeover to the base year 2002=100 will in no way alter rates of changes measured for previous periods, barring rounding.

The weights for the various components of the basket of goods and services are being updated on the basis of the most recent Survey of Household Spending (SHS). The update ensures that the CPI reflects any changes in the consumption patterns of Canadians.

The weights between January 2003 and mid-2007 are based on 2001 consumption patterns. The new basket is based on patterns obtained by the 2005 SHS.

The Bank of Canada's core index followed a similar trend as the one posted by the all-items excluding energy. It rose 2.2% in May 2007 over May 2006, a marked slowdown from the 2.5% increase in April. This index is used by the Bank of Canada to monitor the inflation control target. The 12-month change in this index has remained above 2.0% since July 2006.

On a monthly basis, the all-items index rose by 0.4% between April and May 2007, smaller than the 0.5% increase posted between March and April. Higher gasoline prices accounted for most of the upswing.

The all-items index without energy components rose by 0.3% in May after posting a 0.2% increase in April.

On a monthly basis, the Bank of Canada core index rose 0.3% between April and May 2007, faster than the 0.1% gain between March and April.

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12-month change: Gasoline prices and owned accommodation costs account for gain

The sustained increase in costs associated with owned accommodation, combined with rising gasoline prices, accounted for most of the 2.2 % increase in the national all-items index in May. Higher vehicle insurance premiums and prices for restaurant meals also exerted upward pressure, but to a lesser extent.

Mortgage interest cost rose 5.7% in May compared with the same month in 2006. Mortgage interest cost, which measures the changes brought about by prices in the amount owed by homeowners, has posted a 12-month change higher than 5.0% since early 2007.

Homeowners' replacement cost, which represents the worn-out structural portion of housing and is estimated using new housing prices (excluding land), increased by 6.0%. The contribution of replacement cost to the rise in the all-items index remained substantial in May despite signs that it has tapered off since November 2006.

Consumers spent an average of 3.5% more to eat in May than they did in May 2006. They paid 2.3% more for restaurant meals and 4.0% more at the grocery store for food.

Motorists paid 5.8% more to fill up their vehicles, while vehicle insurance premiums increased by 3.7%.

However, declines in prices for computer equipment and video equipment, natural gas and vehicle purchases and leases mitigated the rise in the all-items CPI.

A 20.0% decline in prices for computer equipment and supplies, and an 8.5% decrease in video equipment, continued the downward trend observed in recent months.

Homeowners were able to take advantage of an 8.8% decline in natural gas prices.

Also, consumers paid 0.3% less to purchase or lease new vehicles. They were able to purchase vehicles that were often better equipped for prices below those of 2006.

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Albertans experience higher price increases than residents of other provinces

Prices paid by consumers were on the rise in all provinces. However, only three provinces posted increases higher than the national average: Alberta (+5.0%), Saskatchewan (+2.7%) and Manitoba (+2.3%).

In all three provinces, the strong year-over-year increase in homeowners' replacement cost exerted most of the upward pressure on consumer prices.

In May, homeowners' replacement cost in Alberta surged 26.3% from May 2006, followed by increases of 20.9% for residents of Saskatchewan and 7.2% for those in Manitoba.

All other provinces posted increases below 2.0% between May 2006 and May 2007, reflecting a relatively slower growth in owned accommodation costs. The slowest increases occurred in Newfoundland and Labrador (+0.7%) and Prince Edward Island (+1.2%). Price increases were lower than the national average in Ontario (+1.9%), Quebec (+1.6%) and British Columbia (+1.7%).

Month-over-month: Pump prices up for a fourth month in a row

Gasoline prices were behind most of the 0.4% growth in the all-items CPI between April and May 2007.

On average, gasoline prices rose 5.5% in May, their fourth consecutive monthly increase. Prices paid at the pump rose in all provinces, with gains ranging from 2.0% in Prince Edward Island to 10.0% in Saskatchewan.

Between January and May 2007, gasoline prices have risen 26.3% on average across the country. Price increases were strongest in Alberta (+30.9%) and Ontario (+28.7%).

The 9.1% increase in prices for traveller accommodation between April and May 2007 also helped push up the monthly all-items CPI. This price jump stayed within historical averages usually posted in the month of May.

Prices for overnight stays were up across the country, as many hotel operators started to apply summer rates. This seasonal trend is normal since each year this sector of the CPI displays increases in May.

Conversely, average prices for natural gas were down 5.2% between April and May 2007, dampening the month-over-month rise in the national all-items CPI. Much of the overall decline in natural gas prices was due to a decrease in prices granted to Alberta residents.

A drop in clothing prices also moderated the rise in the monthly all-items index. Prices for women's clothing fell 3.5% between April and May 2007, while men's clothing prices were down 1.4%.

New collections introduced at boutiques and department stores in the previous months are now available to consumers at reduced prices. This situation is typical for this period of the year, when stores generally hold spring promotions to stimulate sales and reduce their inventories to make room for the next season's collections.

The 3.5% decline in fresh vegetable prices also dampened the rise in the CPI between April and May.

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.

Available at 7 a.m. online under The Daily module of our website.

The May 2007 issue of the Consumer Price Index, Vol. 86, no. 5 (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 June Consumer Price Index will be released on July 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 Division.

Tables. Table(s).