Page content follows

Do Canadians experience inflation differently?

View the most recent version.

Does the Consumer Price Index accurately track inflation for the not-so-average Canadian shopper? After all, low-income, high-income and senior households spend very differently from each other and from the average Canadian. As it turns out, inflation affects all Canadians just about equally.

A close look at the expenditures of the 20% of households with the lowest incomes and the 20% with the highest incomes from 1992 to 2004 shows that the inflation experienced by these families was virtually identical—despite their different spending patterns.

For example, during this period, the prices of many goods and services that figure prominently in the expenditures of lower-income families—such as rent and food purchased at stores—rose slower than the rate of inflation. Starting in 2002, however, this was offset by above-average price increases for tobacco, which lower-income families are more likely to use.

In comparison, while the price changes of goods and services more frequently bought by higher-income households—such as electronics and mortgages—did not increase as quickly as the rate of inflation, the slower increase was offset by much higher costs for items such as fuel and meals at restaurants.

For households composed of seniors aged 65 and over, the rate of inflation from 1992 to 2004 was virtually identical to that felt by other households. During this 12-year span, senior households experienced an average rate of inflation of 1.95%, compared with 1.84% for all other households.

Above-average price increases for new cars, gasoline and tobacco did not hit seniors as hard as other Canadians, but older households did not benefit as much from the below-average price increases of electronics and clothing. Also, seniors spend proportionally more on other items—such as travel, reading material and utilities—whose prices rose at above-average rates.