Highlights

January 2004

In January 2004, consumers paid 1.2% more for the goods and services included in the CPI basket than they did in January 2003. This was the smallest 12-month increase since May 2002, when it was 1.0%.

January’s 12-month increase is a substantial drop from the 2.0% in December, but closer to the 1.6% in November.

However, excluding energy, the drop in the 12-month increase was much less significant, falling from 1.7% in December to 1.5% in January.

Energy prices were, therefore, primarily responsible for the large fall in the CPI 12-month increase from 2.0% to 1.2%. The CPI surged 0.8% from December 2002 to January 2003 due mainly to the return to normal levels for Ontario’s electricity index in January 2003 after a refund was paid to customers in December 2002, and to higher gasoline and natural gas prices.

This monthly surge last year was not matched by an equivalent monthly increase this year, thus reducing the 12-month gap between January indexes compared to December indexes (base effect).

The CPI rose only 0.1% on a monthly basis. Over the last six months, monthly increases have averaged 0.1%.

The all-items index excluding the eight most volatile components, as defined by the Bank of Canada, rose 1.5% from January 2003 to January 2004. This is a considerable fall from December’s 2.2% increase but closer to the 1.8% of November. These variations were caused mainly by the refund paid to Ontario electricity customers in December 2002 (base effect).

Twelve-month percentage change in the CPI: +1.2%
Twelve-month percentage change in the CPI excluding energy: +1.5%

Significant factors contributing to the 1.2% increase in the CPI included tuition fees, automotive vehicle insurance premiums, homeowners’ replacement cost, cigarettes and homeowners’ insurance premiums.

Lower prices for gasoline, traveller accommodation, automotive vehicles, along with lower prices for some fresh fruit and vegetables exerted downward pressure on the 12-month increase in the CPI.

Tuition fees, which were collected in September 2003, increased an average of 8.1%. Increases over the previous three years averaged 3.8%.

Percentage Change from the Same Month of the Previous Year, Canada

Automotive vehicle insurance premiums increased on average 4.8% from January 2003 to January 2004, while premiums for homeowners’ insurance were up 11.8%.

Homeowners’ replacement cost, a measure of the depreciation of a house estimated by the changes in the price of new housing (excluding land), was up 6.1%.

Cigarette prices were 10.3% higher than in January 2003. This increase was primarily due to higher provincial tobacco taxes introduced throughout the year in most provinces.

Gasoline prices were 2.5% lower than in January 2003.

Traveller accommodation prices fell 10.7% compared to January 2003. They have been trending down since mid-2001. In fact, price levels are now similar to those of early 1994.

The tourism industry has been affected by a number of factors over the last year, including the economic slowdown in the United States, a higher Canadian dollar, the world’s instability and the severe acute respiratory syndrome (SARS) outbreak.

Although automotive vehicle prices have increased 3.6% from the seven-year low reached in October 2003, they remained 0.8% lower than January 2003 levels.

Some manufacturers have recently reduced incentives and raised prices on certain models.

Lower prices for some fresh fruit and vegetables also put some downward pressure on the index. Overall fresh fruit and vegetable prices declined 6.1% from January 2003 levels.

Monthly percentage change in the CPI: +0.1%
Monthly percentage change in the CPI excluding energy: -0.1%

From December 2003 to January 2004, the CPI inched up for a third consecutive month, increasing 0.1%. Higher prices for gasoline, non-alcoholic beverages and fuel oil exerted upward pressure on the all-items CPI.

Downward pressure came from price decreases for natural gas, travel tours, air transportation, fresh fruit, sporting and athletic equipment and men’s clothing.

Gasoline prices rose on average 5.7%. Price increases were widespread across provinces and ranged from 1.9% in British Columbia and Newfoundland and Labrador to 7.8% in Alberta. Prices in Prince Edward Island, however, remained stable.

Prices for non-alcoholic beverages rose 5.9% from December to January. Increases were seen in all provinces as prices were returned to normal after holiday season promotions.

Fuel oil prices increased 10.0% in January. This follows increases of 2.3% in November and 3.3% in December. However, prices are still lower than last January by 2.4%.

Price hikes were due to stronger demand due to cold temperatures and higher crude oil prices. Prices increases were noted in all provinces, with the strongest in Quebec (+14.4%) and Ontario (+13.7%).

After increasing in November and December, the natural gas price index decreased 9.3% in January, mostly under the pressure of price declines in Ontario.

In Ontario, utility companies have adjusted rates to reflect lower forecasted prices for the coming year and decreased the amount of a surcharge collected to recover the cost of gas purchased and stored in the spring when prices were higher.

In January 2004, the travel tours index fell by 11.0%. This is a slightly larger decrease than what was observed for January in the previous four years. January decreases averaged 9.8% over those four years.

Travel tour prices are collected every year in January, February and March when they are most popular among Canadians. Of these three months, January is the month with the lowest demand. Since January prices are directly compared to those in March of the previous year, the index usually falls in January. Travel tour prices were down 2.5% from last January’s levels.

Air transportation prices fell 4.8% from December to January. Price decreases are usual in January, as the January fares are compared to high season fares in December.

The seasonally adjusted CPI increased 0.1% from December to January

After seasonal adjustment, the CPI rose 0.1% from December to January.

Higher seasonally adjusted indexes for transportation (+1.0%), alcoholic beverages and tobacco products (+0.6%), clothing and footwear (+0.2%), and health and personal care (+0.2%) contributed to the increase.

The indexes for food (-0.3%), shelter (-0.2%), and recreation, education and reading (-0.3%) exerted some downward pressure. The seasonally adjusted index for household operations and furnishings remained stable.

Special aggregates

All-items excluding the eight most volatile components (Bank of Canada definition)

The all-items index excluding the eight most volatile components, as defined by the Bank of Canada, rose 1.5% from January 2003 to January 2004. This is a considerable slowdown from December’s 2.2% increase but closer to the 1.8% of November.

These variations in the 12-month percentage change were caused mainly by a base effect. A refund paid to Ontario’s electricity customers, following provincial government legislation, lowered the electricity index in December 2002 to an unusually low level. December’s 12-month change was bigger because the December 2003 index was compared to a temporarily low index in December 2002.

Factors that contributed significantly to the rise in the all-items index also contributed significantly to the 1.5% rise in this index. Most of the difference between the two rates of increase was the result of the exclusion of the effect of increasing cigarette prices and decreasing prices for gasoline, and for fresh fruit and vegetables.

From December 2003 to January 2004, the all-items index excluding the eight most volatile components, as defined by the Bank of Canada, remained unchanged. The main factor explaining the difference between the 0.1% increase in the CPI and the fact that this index remained unchanged from last month, is the exclusion of the upward pressure from higher gasoline and fuel oil prices and the effect of lower natural gas prices.

Energy

Energy prices were down 1.1% from January 2003 to January 2004. This follows a 6.7% increase the previous month.

Lower gasoline prices (-2.5%) combined with weaker fuel oil prices (-2.4%) accounted for the decrease. Higher natural gas (+1.7%) and electricity prices (+0.1%) partially offset these downward pressures.

From December to January, energy prices increased 2.0% due to price increases for gasoline (+5.7%) and fuel oil (+10.0%). Natural gas prices decreased (-9.3%), while electricity prices remained stable.

Goods and services

From January 2003 to January 2004, prices in the goods sector remained unchanged.

Upward pressure came from higher prices for non-durable goods (+0.7%), mostly cigarettes, and semi-durable goods (+0.5%), primarily women’s clothing. This was offset by downward pressure from the durable goods index (-1.6%), due in large part to lower prices for automotive vehicle, as well as for computer equipment and supplies.

The services index climbed 2.4% compared with January 2003. Price increases were widespread within this category. The strongest upward pressures came from higher tuition fees, automotive vehicle insurance premiums and homeowners’ replacement cost, while lower traveller accommodation prices exerted the strongest downward push.

Between December 2003 and January 2004, prices in the goods sector increased on average by 0.3%.

Non-durable goods prices rose (+0.6%), mainly under the influence of higher prices for gasoline and fuel oil, while lower natural gas prices partly offset the increases. Lower prices for semi-durable and durable goods attenuated the increase for non-durable goods. The 0.4% decrease in semi-durable goods was led by weaker men’s clothing and women’s footwear prices, while women’s clothing prices exerted substantial upward pressure. The 0.1% drop in the durable goods was due primarily to lower prices for sporting and athletic equipment. However, higher prices for automotive vehicles counterbalanced most of these decreases.

Lower prices for travel tours (-11.0%) and air transportation (-4.8%) were the main contributor to the 0.1% drop in the Services index between December 2003 and January 2004.

2003 Annual Review of the Consumer Price Index