Note
This edition of the Inter-city Price Index marks the first time that
Shelter is included in the index. As a result, an All-items index is
now produce that can be used to make overall inter-city retail price
comparisons for 11 cities.
Shelter, as an expenditure category, was previously absent from the
Inter-city index program because of difficulties associated with its
measurement. A price index designed to compare inter-city prices requires
that the sampled commodities across areas be identical to ensure that
variations in index levels are due to price differences and not to variations
in product attributes. For many products, adjusting for such quality
differences is relatively straightforward. In the case of shelter however,
place-to-place comparison is problematic. Because location is such a
critical element in the pricing of shelter, establishing comparable
matches across cities is difficult if not impossible.
Recent advances in price index research have provided a way to compare
shelter for inter-city comparisons. Hedonic regressions are used to
adjust for quality differences between cities and produce reliable inter-city
comparisons. This approach has been applied successfully in the context
of temporal price indexes such as the Consumer Price Index, for products
that change frequently and hence, do not respect the traditional matched-samples
methodology.
For the purpose of the inter-city index, a rental equivalence approach
is retained. This approach assumes that in the long run, changes in
the rental market accurately reflect the changes in costs faced by homeowners.
As well, it has the advantage of measuring the consumption aspects of
shelter and excluding from it its investment aspect. Thus, the shelter
component of the inter-city price index program approximates across
cities the differences in the cost of consuming a flow of shelter services
provided for both renters and homeowners.
A more detailed description of the treatment of shelter in the Inter-City
Price Index program will be made available in a forthcoming paper to
be published in Prices Division Analytical Research Papers series.
| Inter-city indexes of retail price differentials
|
|
Table 12 shows consumer price differentials prevailing amongst 11 Canadian
cities situated in all 10 provinces for a selection of commodities and
services at the specified point in time.
The data base of this place-to-place study of comparative retail prices
was largely drawn from the large volume of price quotations collected
for the production of the monthly consumer price indexes.
In developing these spatial price relationships, efforts were made
to achieve comparability by seeking to equate qualities of goods and
services in the various locations and by matching types of retail outlets
as far as possible. To optimize price comparability between locations,
differential price measurements were initially derived separately as
between the following pairs of cities:
| St. John's |
- Halifax |
| Charlottetown |
- Halifax |
| Saint John |
- Halifax |
| Ottawa |
- Halifax |
| Toronto |
- Montréal |
| Ottawa |
- Toronto |
| Toronto |
- Winnipeg |
| Regina |
- Winnipeg |
| Edmonton |
- Winnipeg |
| Edmonton |
- Vancouver |
Within each city pair, price quotations were matched at the item level
on the basis of identical specifications, including brand names whenever
possible and also with some regard for comparability of retail outlets
and merchandising practices. By means of a linking procedure, the paired
city item indexes were initially compared with their counterparts in
a common base city; subsequently they were related to the weighted average
of the combined 11 cities equalling 100.
The city-to-city price relationships for individual items thus derived
were then aggregated by application of the combined 11-city weighting
patterns updated for price change to the time of the inter-city retail
price comparison study.
It should be noted, especially in periods of volatile price movement,
that city-to-city retail price relationships may be significantly affected
by the timing and the relative rate of price change occurring in each
location. Furthermore, since the retail prices used in this study are
those faced by consumers, they include sales and excise taxes as applicable.
Thus, comparative rates of provincial sales tax in effect in the various
cities at the time of price comparison, as well as changes in the rate
of incidence of such taxes, can be of importance in explaining inter-city
price differentials for tax-affected items or groups of items.
(2) The weights shown are rounded 1996 basket weights at december 1997
prices for Canada. They are provided for illustration only; the weights
actually used are combined city weights with adjustments for price change
since December 1997.
(3) Includes the following sub-groups: sugar and syrups, confectionery
items, margarine, other edible fat and oil items, coffee, tea, condiments,
spices and vinegars, soup, infant and junior foods, pre-cooked frozen
food preparations, non-alcoholic beverages and all other food preparations.
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