Highlights

February 2004

In February 2004, consumers paid 0.7% more for the goods and services in the CPI basket than they did in February 2003. This was a significant slowdown from the 1.2% increase registered in January. It was also the smallest 12-month increase since December 2001, when it was 0.7% as well.

The 12-month increase in the CPI excluding energy also slowed significantly, declining from 1.5% in January to 1.1% in February.

The monthly increase in both these indexes was far smaller this year than for the same period a year ago, which, in general terms, accounts for the slowdown in the 12-month increase between January and February (base effect).

The CPI rose only 0.2% on a monthly basis in February this year, compared to 0.7% in February 2003. Over the last ten months, the CPI has been relatively stable, increasing an average of 0.1% per month, with no increase or decrease larger than 0.2%.

Gasoline prices, which were 5.8% lower than in February 2003, accounted for about a quarter of the slowdown in the 12-month increase of the all-items CPI. Gasoline prices in January 2004 were only 2.5% lower than those of January 2003.

The rest of the slowdown in the 12-month increase was mostly due to the purchase and leasing of automotive vehicles, women’s clothing, cigarettes and fuel oil.

The all-items index excluding the eight most volatile components, as defined by the Bank of Canada, rose 1.1% from February 2003 to February 2004. This was the second consecutive slowdown after the increase slowed from 2.2% in December to 1.5% in January. As with the CPI all-items, February’s monthly increase was far weaker this year than last year, reducing the 12-month gap between February indexes compared to the one between January indexes (base effect).

Twelve-month percentage change in the CPI: +0.7%
Twelve-month percentage change in the CPI excluding energy: +1.1%

Some of the key factors contributing to the 0.7% increase in the CPI included homeowners’ replacement cost, cigarettes, tuition fees, restaurant meals, automotive vehicle insurance premiums and homeowners’ insurance premiums.

Lower prices for gasoline, automotive vehicles, traveller accommodation and computer equipment and supplies exerted downward pressure on the 12-month increase in the CPI.

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 8.0% higher than in February 2003. This increase was primarily due to higher provincial tobacco taxes introduced throughout the year in most provinces.

Tuition fees, which were collected in September 2003, increased on average 8.1%. The average increase over the previous three years had been 3.8%.
Consumers paid an average 2.7% more for restaurant meals.
The increase in automotive vehicle insurance premiums from February 2003 to February 2004 averaged 4.2%, while homeowners’ insurance was up 10.5%.

Gasoline prices were 5.8% lower than in February 2003.

Although the index for the purchase of automotive vehicles increased 1.6% compared to October 2003, its lowest level in seven years, it remained 2.7% lower than in February 2003.

Despite a monthly increase, traveller accommodation prices fell 12.7% from February 2003. Prices in this sector have been trending downwards since mid-2001. Prices are still similar to those observed in early 1994.

Computer equipment and supplies prices fell 15.6% since February 2003.

Monthly percentage change in the CPI: +0.2%
Monthly percentage change in the CPI excluding energy: +0.1%

From January to February 2004, the CPI inched up for a fourth consecutive month, increasing 0.2%. Higher prices for gasoline and travel tours exerted upward pressure on the all-items CPI.

Downward pressure came essentially from the price decrease for automotive vehicles.

Gasoline prices rose on average 3.4%. Price increases were widespread across provinces and ranged from 2.1% in Ontario to 7.7% in Manitoba.

In February 2004, the travel tours index increased 11.9%. This was similar to the increases recorded in the month of February in each of the previous five years, which averaged 11.0%.

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 February prices are compared to those of January, the index tends to increase substantially in February.

The price index for the purchase of automotive vehicles declined 1.9% in February. This was due to more substantial manufacturer rebates on certain models and other dealer discounts used to stimulate sales. The larger rebates more than made up for the increases in the suggested retail prices by some manufacturers.

The seasonally adjusted CPI declined 0.1% from January to February

After seasonal adjustment, the CPI declined 0.1% from January to February.

Lower seasonally adjusted indexes for transportation (-0.2%), health and personal care (-0.3%), recreation, education and reading (-0.1%), and clothing and footwear (-0.2%) accounted for this decline.

The indexes for shelter (+0.3%) and alcoholic beverages and tobacco products (+0.3%) exerted upward pressure. The seasonally adjusted indexes for household operations and furnishings, and food remained stable.

Special aggregates

All-items index 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 1.1% from February 2003 to February 2004. This was the smallest 12-month increase since September 2000.

Factors that contributed significantly to the rise in the all-items CPI also contributed significantly to the 1.1% 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 gasoline prices.

From January to February 2004, the all-items index excluding the eight most volatile components, as defined by the Bank of Canada, increased 0.2%. Price increases for travel tours and clothing were among the main factors to exert upward pressure, while the decrease in automotive vehicle purchase prices moderated these pressures.

Energy

Energy prices were down 3.1% between February 2003 and February 2004. This followed a 1.1% decline in the previous month.

Lower gasoline prices (-5.8%) combined with weaker fuel oil prices (-9.4%), accounted for the decline. Higher prices for natural gas (+2.5%) and electricity (+0.2%) partially offset these downward pressures.

From January to February, energy prices increased 2.2%. All components were up. Prices for gasoline (+3.4%), natural gas (+1.9%) and fuel oil (+3.9%) accounted for most of the increase. Electricity prices increased less (+0.1%).

Goods and services

From February 2003 to February 2004, prices in the goods sector declined 0.8%.

Downward pressures came from the durable goods index, down 2.7%, which was largely a result of lower prices for automotive vehicles. The semi-durable goods and the non-durable goods indexes remained unchanged compared to their February 2003 levels.

Widespread price increases triggered a 2.1% increase in the services index over February 2003. Most of the upward pressure came from homeowners’ replacement cost, tuition fees, automotive vehicle insurance premiums and homeowners’ insurance premiums. Lower traveller accommodation and automotive vehicle leasing prices accounted for most of the downward pressure.

Between January and February 2004, the increase in the price of goods averaged 0.3%.

Since the non-durable goods index (+0.6%), carried more weight than that of semi-durable goods (+1.3%), its increase had more impact on the goods index. Durable goods prices, which declined 0.8%, almost entirely as a result of the drop in automotive vehicle prices, moderated the rise in the goods index. The prices of non-durable goods rose mainly under the influence of higher gasoline prices. The rise in the semi-durable goods index was mainly the result of price increases for women’s, men’s and children’s clothing.

Finally, higher prices for travel tours accounted for most of the 0.2% increase in the services index between January and February 2004.