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The Consumer Price Index rose by 2.3% in March 2007 compared to March 2006, accelerating for a second consecutive month since the beginning of the current year. As in January and February, when increases were 1.2% and 2.0% respectively, gasoline and costs associated with owned accommodation drove the 12-month change in the all-items CPI, while the drop in natural gas prices had a moderating effect on this increase.
The 12-month rate of increase in the all-items index excluding energy components slowed down to 2.1% in March 2007 after posting a 2.2% increase the previous month. This index was pushed up by costs for owned accommodation and by prices for food purchased in restaurants and fresh vegetables.
In March 2007 the Bank of Canada’s core index rose by 2.3% compared with the same month last year. This index, which is used by the Bank to monitor the inflation-control target, had posted a slightly faster rate of growth (2.4%) the previous month.
The monthly all-items index climbed by 0.8% between February and March 2007, a slight increase as opposed to the 0.7% registered the previous month. The leap in gasoline prices accounted for most of this month-over-month increase. There has not been such a pronounced monthly increase in the CPI since September 2005, when consumer prices shot up (+0.9%) in the wake of Hurricane Katrina.
Between February and March 2007, the all-items index excluding energy increased by 0.3%, compared to a 0.6% increase recorded in February. This rise was largely the result of increases in the indexes for insurance premiums for automotive vehicles, women’s clothing and travel tours.
On a monthly basis, the core index posted 0.3% growth in March, slowing down compared to the 0.5 % rate observed the previous month.
Twelve-month percentage change in the CPI: +2.3%
Twelve-month percentage change in the CPI excluding energy: +2.1%
Consumers had to spend 2.3% more on goods and services included in the Consumer Price Index basket in March 2007 than in March 2006. This increase follows a 12-month increase of 2.0% recorded the previous month.
All provinces contributed to the rise in the 12-month percentage change in consumer prices in March, primarily because of the high gasoline prices observed throughout the country this month. In Alberta, consumers had to spend 5.5% more, with most of the increase coming from costs for housing and for filling up their vehicles. Both Manitoba and Saskatchewan recorded 2.6% growth, while British Columbia residents paid 2.2% more in March 2007 than they did a year earlier on goods and services included in the CPI basket. With the exception of New Brunswick, the Atlantic provinces recorded rates of increase slightly higher than or equal to 2.0%. Quebec (+1.8%), Ontario (+1.8%) and New Brunswick (+1.4%) all posted 12-month changes of less than 2.0% during the same period.
In March, higher gasoline prices were largely responsible for the rise in the all-items index. Mortgage interest cost, as well as homeowner’s replacement cost, also exerted upward pressure on the all-items CPI. However, this pressure was moderated by the drop in the price of natural gas.
Canadian consumers paid 10.0% more for gasoline in March 2007 versus March 2006, the strongest 12-month increase observed since July 2006 (16.1%). Strong demand for gasoline in the United States, which translated into a continual decrease in the gasoline reserve of that country over the last seven weeks, was an important factor behind the rise in gasoline prices.
Gasoline prices in Ontario remained high (+12.8%), partially from the effects of the interruptions in production at a number of refineries the previous month. However, the situation returned to normal in mid-March, with refineries once again operating at maximum capacity. With the exception of New Brunswick, where prices were up by 2.2% in March 2007 over March 2006, gasoline prices in the other Canadian provinces posted increases ranging from 7.5% in Manitoba to 14.3% in Prince Edward Island.
Despite a loss of momentum observed in recent months, the contribution of owned accommodation remained solidly entrenched among the most significant factors that push up the change in the all-items index.
Compared with the previous year, the index for mortgage interest cost, which measures changes in the amount of mortgage interest owed by homeowners, increased by 5.4% in March 2007, up slightly from the 5.3% rate recorded the previous month.
The 12-month increase in the index for homeowner’s replacement cost, which represents the worn-out structural portion of housing and is estimated using new housing prices (excluding land), was 6.9% in March 2007. Following a 7.1% rise the previous month, the growth in this index continued the slowdown that began six months earlier.
This downturn in the index for homeowner’s replacement cost was also observed in Alberta during the same period, despite a 12-month percentage change of 34.3% in March. Ontario (+2.9%), Quebec (+3.7%), British Columbia (+2.5%), Saskatchewan (+14.4%) and Manitoba (+7.1%) also contributed to the increase in the national index for homeowner’s replacement cost.
The increase in prices for fresh vegetables (+14.6%) and for food purchased in restaurants (+2.2%) also exerted upward pressure in March 2007 in relation to March 2006.
Continuing a trend observed over the past nine months, the decrease in the 12-month rate of increase in the natural gas index had a moderating effect on the rise in the all-items index. The price of this energy component dropped by 15.7% in March 2007 compared with March 2006, following a 19.3% decline recorded the previous month.
Still benefiting from prices set during warmer weather and higher-than-normal inventory levels, almost all Canadian consumers enjoyed lower rates in March 2007 compared to March 2006.
Plunging natural gas prices in Ontario (-30.4%) accounted for the bulk of the decrease in this index in March. Residents of almost all other Canadian provinces enjoyed reductions in natural gas prices. The exception was Alberta, where this index shot up by 23.5% in March 2007 in relation to the previous year. This rate increase can partly be explained by the cold weather observed in March, combined with a decrease in the stock of natural gas already in storage. The result was an increase in demand for this energy component, leading to a rise in the price offered by certain natural gas suppliers in Alberta.
The indexes for computer equipment and supplies (-19.2%) and for video equipment (-10.0%) continued the downward trends of the past several years. Prices for women’s and men’s clothing were also down in March 2007 compared to the previous year. All of these components exerted slight downward pressure on the 12-month rate of increase in the all-items CPI during the same period.
Non-seasonally adjusted monthly percentage change in the CPI: +0.8%
Non-seasonally adjusted monthly percentage change in the CPI excluding energy: +0.3%
Consumer prices were up by 0.8% between February and March 2007, a slight increase as opposed to the 0.7% registered in February. This monthly increase was largely attributable to the surge in prices that drivers paid at the pump in March.
Aside from the leap in gasoline prices, automotive vehicle insurance premiums and women’s clothing exerted upward pressure on the all-items index between February and March 2007. Reduced prices for fresh vegetables and fruit and for vehicle purchases and leases nonetheless slowed down this upward trend to some extent.
Across the country, gasoline prices climbed by 12.5% between February and March 2007. The price of crude oil was approximately $62 (US) a barrel in early March and, following a few fluctuations, ended the month very close to $66 (US). This increase in the price of a barrel of crude oil, partly as a result of geopolitical tensions, pushed up gasoline wholesale prices, leading to higher retail prices for gasoline in March 2007. The production losses associated with refinery maintenance in anticipation of strong demand from drivers during the summer also contributed to the rise in prices at the pump this month.
Residents of the Atlantic Provinces and Quebec paid approximately 14.0% more for their gasoline in March. Ontarians and Albertans had to pay almost 13.0% more at the pump, while consumers living in other provinces faced increases ranging from 8.2% in British Columbia to 12.1% in Manitoba.
For Ontario residents, the 12.8% rise in average gasoline prices noted in March added to the 9.8% increase posted the previous month. Drivers filling their tanks with regular fuel at service stations in the Toronto region had to pay an average of 100.7¢ per litre in March, after paying on average only 80.1¢ per litre in January.
Automotive vehicle insurance premiums were up 2.3% this month compared with February. Most of the observed increase can be attributed to adjustments reflecting the fact that we now track the insurance premiums for a more recent automotive vehicle model.
Retailers generally introduce their summer women’s clothing lines in March. In keeping with this historical trend, prices for women’s clothing increased by 4.4% between February and March 2007 because of the new lines.
Again this month, the upward pressure exerted on the Consumer Price Index by the above indexes was only slightly offset by those components posting downward monthly changes.
Fresh fruit and vegetable prices were down by 5.3% and 2.6% respectively in March. The effects of freezing temperatures on the west coast of the United States were not as negative as anticipated. The supply from other countries of origin also served to bring down the price of these foods between February and March 2007.
During the same period, the price of vehicle purchases and leases decreased by 0.5%. This month, some manufacturers increased the financial incentives they had put in place in previous months, which pushed down this index in March.
The seasonally adjusted CPI climbed by 0.5% between February and March
Pushed up by half of the components, the seasonally adjusted all-items index rose by 0.5% between February and March 2007. The increase in prices for transportation (+3.0%), shelter (+ 0.5%), recreation, education and reading (+0.2%) and household operations and furnishings (+0.2%) played a role in the rise in the seasonally adjusted all-items index in March. The drop in the indexes for food (-0.3%), clothing and footwear (-0.3%), alcoholic beverages and tobacco products (-0.3%) and health and personal care (-0.2%) nonetheless exerted downward pressure on the seasonally adjusted all-items index during the same period.
The seasonally-adjusted core index as established by the Bank of Canada increased by 0.1% between February and March 2007.
Special aggregates
Core CPI published on behalf of the Bank of Canada
The core index is obtained by removing the effect of the changes in indirect taxes from the all-items CPI from which the eight most volatile components identified by the Bank of Canada have been excluded. These volatile components are fruit, fruit preparations and nuts; vegetables and vegetable preparations; mortgage interest cost; natural gas; heating oil and other fuels; gasoline; inter-city transportation; and tobacco products and smokers’ supplies.
The 12-month increase in the core index as established by the Bank of Canada was 2.3% in March 2007, a slight retrenchment in relation to the 2.4% increase observed last month. On a monthly basis, this index climbed by 0.3% in March 2007, slightly less than the 0.5% recorded the previous month.
Energy
The energy products index was up by 4.5% in March 2007 over the same period the previous year. Last month this index remained unchanged. In March, the rise in gasoline prices was the major factor behind this increase, which was slowed down only minimally by the decrease in natural gas prices.
The 12-month percentage change in gasoline prices was 10.0% in March 2007. The increase in prices for electricity (+3.8%), fuel, parts and supplies for recreational vehicles (+7.0%), and heating oil and other fuels (2.6%) also pushed up the energy index. Conversely, the drop in natural gas prices (-15.7%) exerted downward pressure.
Month over month, the energy index climbed by 6.9% in March 2007. The 12.5% rise in prices at the pump accounted for most of this increase in the monthly energy index. The increase in the indexes for natural gas (+3.3%), heating oil and other fuels (+3.8%) and fuel, parts and supplies for recreational vehicles (+6.1%) also contributed to the positive trend in the energy index. The reduction in electricity prices (-0.1%) had a moderating effect on the rise in the monthly energy index between February and March 2007.
Goods and services
The goods index climbed by 1.5% in March 2007 compared to March 2006, following a 0.8% rise the previous month. Prices for non-durable goods were up this month, while durable and semi-durable goods posted decreases.
The 3.5% increase in prices for non-durable goods pushed up the 12-month increase in the goods index in March 2007. Gasoline (+10.0%), fresh vegetables (+14.6%), electricity (+3.8%), fresh fruits (+9.2%) and cigarettes (+2.7%) contributed to the increase in the 12-month percentage change in the non-durable goods index.
The 1.8% decrease in the durable goods index in March 2007 compared with March 2006 could be explained by lower prices for vehicle purchases and leases (-1.1%), computer equipment and supplies (-19.2%) and video equipment (-10.0%).
The semi-durable goods index fell by 1.4%, owing to lower prices for toys, games and hobby supplies (-6.0%), as well as for women’s clothing (-1.7%) and men’s clothing (-1.7%).
On a monthly basis, the goods index rose by 1.4% in March 2007, following a 1.0% rise the previous month. The monthly indexes for semi-durable goods (+1.8%) and non-durable goods (+1.9%) increased between February and March, whereas the durable goods index (-0.1%) eased slightly.
The services index climbed by 3.2% in March 2007 over March 2006. The rate of increase in the mortgage interest cost index (+5.4%) as well as in homeowner’s replacement cost (+6.9%) contributed to most of the rise in the services index.
The monthly services index was up by 0.4% in March 2007 for a second straight month.
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