Highlights

Twelve-month percentage change in the CPI: +2.9%
Twelve-month percentage change in the CPI excluding energy: +2.7%

Canadian consumers paid 2.9% more in May 2003 than they did in May 2002 for the goods and services included in the Consumer Price Index (CPI) basket. The 12-month increase continued to slow for the third consecutive month as energy prices kept on falling from their recent highs. Excluding energy prices, the 12-month increase in the CPI was 2.7% for the second month in a row, after rising 3.2% in March.

Energy prices in May 2003 were 4.7% higher than in May 2002, a slowdown from the rates of 17.5% recorded in March and 6.2% in April. This smaller increase primarily reflects falling gasoline prices and narrows the gap between the All-items CPI and the CPI excluding energy. Natural gas prices fell on a monthly basis lowering the 12-month increase in this index from 49.6% in April to 35.3% in May. April’s electricity index was 11.0% lower than a year before as a majority of Ontario consumers received refunds. In May, the impact of those refunds disappeared, however a small number of companies refunded their consumers during the month keeping the electricity index 1.3% lower than its May 2002 level. This rebound in the electricity index, along with higher food prices, contributed to keeping the increase in the All-items CPI comparable to that of April (+3.0%).

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

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

After falling from March to April, the CPI edged up by 0.1% from April to May. The rise in electricity index was the main factor behind that monthly increase as the refunds received by Ontario consumers tapered off. Traveller accommodation prices were up as is usually the case at this time of the year. Cigarettes prices also added to the upward pressure. The increase in the CPI was slowed by the downward pressure from the drop in gasoline prices (-6.9%) and to a lesser extent, the fall in the price of natural gas (-8.7%).

The 10.9% increase in the electricity index was entirely attributed to the Ontario index, as was the 10.1% drop in April. The electricity companies in that province that credited their customers on their April 2003 bills returned to regular billing in May. The refunds are the result of December 2002 legislation by the provincial government that fixed the price of electricity at 4.3¢ per kilowatt-hour retroactive to May 1, 2002.

Traveller accommodation prices were up 6.2% as hotel operators introduce their summer rates. This increase contrasts with the average increase of 10.7% over the last 5 years. The temporary exemption of the 5.0% retail sales tax for hotel and motel accommodations in Ontario that became effective May 1, 2003 partly counterbalanced the seasonal rate increase. The monthly increase for Ontario residents was only 2.7%, whereas the index remained 17.7% below its level of a year earlier. The slowdown in the economy continued to have a major impact on the Canadian hotel industry, while the Ontario market felt the additional effect of SARS (Severe and Acute Respiratory Syndrome).

Cigarettes prices increased 1.6% due mainly to a manufacturer price increase in response to higher tobacco prices. Provincial sales taxes increased in Prince Edward Island and Manitoba. These tax changes came into effect in mid-April so a residual amount of the increase is reflected in this month’s index.

From April 2003 to May 2003, gasoline prices have once again decreased across Canada (-6.9%) with drops ranging from 4.1% in Newfoundland and Labrador to 10.4% in Nova Scotia. This follows a decrease of 9.0% last month.

Natural gas prices fell by 8.7% from April 2003 to May 2003, the first drop in six months and the biggest drop in over a year. This was mainly attributable to price decreases in Alberta resulting from reduced demand.

The seasonally adjusted CPI declined by 0.1% between April and May 2003

After correcting for seasonal influences, the All-items CPI fell 0.1% in May, following a 0.7% decrease in April. The transportation index (-1.4%) was the major contributor to this decline, largely because of lower gasoline prices. A drop in the seasonally adjusted index for recreation, education and reading (-0.5%) also contributed to the monthly decrease. Increases for shelter (+0.5%), food (+0.2%), clothing and footwear (+0.7%), and alcoholic beverages and tobacco products (+0.4%) partially offset the decreases. The household operations and furnishings index, as well as the health and personal care index remained unchanged.

Special aggregates

All-items excluding the 8 most volatile components (Bank of Canada definition)

The All-items index excluding the 8 most volatile components as defined by the Bank of Canada increased by 2.3% between May 2002 and May 2003. The main contributors to this increase were automotive vehicle insurance premiums (+23.1%) and homeowners’ replacement cost (+6.4%).

The All-items index excluding the 8 most volatile components as defined by the Bank of Canada increased 0.5% between April and May. This increase is largely due to the disappearance of the effects of the electricity refunds received in April by a large proportion of Ontario residents, the result of provincial legislation that was introduced in December 2002. Without the electricity refund, the increase would have been 0.2%.

Energy

Nearly all of the 4.7% increase in the energy index between May 2002 and May 2003 was due to increases in the price of natural gas (+35.3%), with a much smaller contribution from fuel oil (+10.5%). The gasoline (-1.3%) and electricity (-1.3%) indexes exerted some downward pressure.

Between April and May 2003, energy prices fell by 2.2% with all of its component indexes recording decreases except electricity. Slightly more than half of the downward pressure on the energy index was attributable to lower gasoline prices (-6.9%) which fell for the second consecutive month. Added pressure came from lower natural gas prices (-8.7%) and fuel oil prices (-11.8%).

Goods and Services

From May 2002 to May 2003, prices in the goods sector increased by 2.2% after posting a 2.0% increase in April. All the upward pressure came from the non-durable goods index (+4.1%), due mainly to higher natural gas and cigarette prices. Both semi-durable and durable goods posted small decreases. The 0.7% decline in the semi-durable goods index was led by lower clothing prices, while that of the durable goods index (-0.2%) was due mostly to falling prices for video equipment and upholstered furniture.

Almost two-thirds of the upward pressure on the All-items index came from the services sector. Widespread price increases caused the services index to climb 3.5% compared with May 2002. Traveller accommodation prices were one of the few areas that exerted a downward influence on the services index.

Between April and May 2003, the goods index fell by 0.2% after a 1.6% decrease between March and April. Prices fell for non-durable goods (-0.2%), particularly for gasoline and natural gas, and for semi-durable goods (-0.6%), led by lower clothing prices. The decreases were partially offset by the increase in the durable goods index (+0.3%) which was due almost entirely to higher purchase prices for recreational vehicles.

Higher prices for traveller accommodation (+6.3%) were the main contributor to the 0.3% increase in the services index between April and May 2003.