Highlights

In August 2004, Canadian consumers paid 1.9% more than they did in August 2003 for the goods and services included in the Consumer Price Index (CPI) basket, a slowdown from the 2.3% increase registered in July. The 12-month variation in the All-items excluding energy index has however been fairly stable, rising 1.5% in August, after increases of 1.6% in June and July.

The slowdown in the 12-month change in the All-items index was essentially due to gasoline prices. The 12-month increase in gasoline prices slowed from 17.9% in July to 7.8% in August. The strong monthly increase in gasoline prices from July to August last year (+9.0%) combined with the small drop from July to August this year (-0.3%) contributed to reduce the gap between the 2003 and 2004 indexes in August compared with what it was in July.

Gasoline, Canada, Indexes 1992=100

The All-items index excluding the eight volatile components identified by the Bank of Canada rose by 1.5% between August 2003 and August 2004. This follows a 1.9% rise in July.

Between July and August, the CPI fell by 0.2% mainly as a result of a decline in automotive vehicle prices.

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

Twelve-month percentage change in the CPI: +1.9%

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

In August, the CPI registered a smaller 12-month increase than in the previous three months, increasing 1.9% compared with 2.3% in July and 2.5% in May and June. In August, upward pressure was exerted primarily by gasoline prices, homeowners’ replacement cost, cigarette and restaurant meal prices, tuition fees and beef prices.

Dampening these increases were lower prices for computer equipment and supplies, automotive vehicle leasing and fresh vegetables.

Gasoline prices were up 7.8% from August 2003. Increases were observed in all provinces, with the highest in Prince Edward Island (+22.9%) and the lowest in Saskatchewan (+5.1%).

Homeowners’ replacement cost, which represents the worn out structural portion of housing and is estimated using new housing prices (excluding land), rose 6.9% from August 2003. Manitoba had the highest increase (+8.5%) and New Brunswick the lowest (+1.6%). Strong demand in the housing market, as well as higher material and labour costs across Canada are the main factors behind this increase.

Increases in tobacco taxes over the last 12 months explain most of the 7.7% rise in cigarette prices since August 2003, although higher tobacco prices and transportation costs also contributed.

Restaurant meal prices increased 2.7% between August 2003 and August 2004.

Tuition fees are collected only once a year, in September. The 8.1% increase in tuition fees registered last September continues to have an impact on the 12-month increase in the CPI. Tuition fees for the 2004-2005 school year will be included in the CPI calculation next month.

Beef prices increased by 18.8% compared to August 2003, the highest 12-month increase since May 2001, when a 19.2% rise was registered. The significant difference between the 12-month increase in August and the 8.1% gain registered in July is mainly attributable to the 8.3% drop in prices in August last year. Hence in August, the 2004 index is being compared to a much lower 2003 index than it was in July, leading to a drastic increase in the 12-month change. The drop in beef prices in August 2003 was the result of restrictions imposed by several countries, including the United States, on imports of Canadian beef following the discovery on May 20, 2003 of a case of bovine spongiform encephalopathy (BSE) in Alberta.

Beef, Canada, Indexes 1992=100

Once again, computer equipment and supplies prices moderated these increases, falling 16.9% as prices for desktop computers declined.

Automotive vehicle leasing prices fell 7.5% in August, following financial incentives offered in the last twelve months.

Prices for fresh vegetables dropped by 8.0% between August 2003 and August 2004. There has been a downward trend in vegetable prices since January 2003, as shown by the negative 12-month changes since that date. Favourable growing weather in Canada and in exporting countries is partly responsible.

Monthly percentage change in the CPI: -0.2%

Monthly percentage change in the CPI excluding energy: -0.2%

The CPI fell 0.2% from July to August. Downward pressure came mostly from lower prices for automotive vehicles. Lower prices for fresh vegetables also contributed to the decline. Higher prices for women’s clothing and natural gas exerted a slight dampening effect on these downward pressures.

Automotive vehicle prices fell on average 2.6% from July to August 2004. Similar declines occurred in all regions of Canada. At this time of the year, manufacturers increase incentive programs to help reduce stock before the arrival of the new models.

Again this month, consumers benefited from local produce which resulted in a drop of 8.5% in the price of fresh vegetables in August 2004. Lower prices for “other fresh vegetables”, lettuce and tomatoes contributed to this decrease which was dampened somewhat by higher potato prices.

Higher prices for women’s clothing slowed the fall in the CPI in August, increasing by 1.7%. Increases are usually observed in the women’s clothing index in August.

Natural gas prices also had a moderating effect, rising 1.5% from July to August 2004. The increase was felt mainly in Alberta (+5.8%), Manitoba (+3.9%) and Ontario (+0.2%). In Quebec, consumers benefited from a 1.3% decrease, while prices remained stable in British Columbia and Saskatchewan.

The seasonally adjusted CPI fell 0.2% from July to August

After seasonal adjustment, the CPI fell 0.2% from July to August 2004.

Downward pressure came from the seasonally adjusted indexes for transportation (-1.0%), recreation, education and reading (-0.2%), as well as for health and personal care (-0.3%).

The decreases were dampened by higher seasonally adjusted indexes for food (+0.5%), shelter (+0.2%), clothing and footwear (+0.5%), alcoholic beverages and tobacco products (+0.3%), as well as for household operations and furnishings (+0.1%).

Special aggregates

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

The All-items index excluding the eight volatile components identified by the Bank of Canada increased by 1.5% from August 2003 to August 2004. The main contributors to this increase were homeowners’ replacement cost (+6.9%), tuition fees (+8.1) and beef prices (+18.8%).

From July to August 2004, the All-items index excluding the eight volatile components identified by the Bank of Canada fell by 0.2%, mostly under the influence of price reductions for automotive vehicles ( 2.6%). Price increases in women’s clothing (+1.7%) and rent (+0.2%) partially offset the downward pressure on the index.

Energy

The energy index rose 6.2% from August 2003 to August 2004, due mostly to the 7.8% rise in gasoline prices. Prices for electricity (+4.3%), fuel oil (+10.7%), natural gas (+2.4%) and fuel, parts and supplies for recreational vehicles (+5.7%) also increased.

On a monthly basis, the energy index rose 0.1% under pressure from higher natural gas (+1.5%) and electricity (+0.1%) prices. Lower prices for gasoline (-0.3%) and fuel, parts and supplies for recreational vehicles (-0.2%)/ dampened this increase.

Gasoline prices were again the main factor for August’s increase, with a 12-month advance of 7.8%, largely contributing to push the non-durable goods index up 3.7%. Higher prices for cigarettes (+7.7%), beef (+18.8%) and electricity (+4.3%) also contributed to the increase. The increase in non-durable goods index was partially offset by decreases in the indexes of durable and semi-durable goods. The durable goods index fell 1.8%, with the prices for computer equipment and supplies (-16.9%) being the main contributor to this decline. The prices of toys, games and hobby supplies (-3.5%), women’s clothing (-0.8%) and athletic footwear (-3.7%) were the main factors in the 0.4% decrease in the semi-durable goods index.

The services index rose 2.2% from August of last year. Increases in homeowners’ replacement cost (+6.9%), restaurant meal prices (+2.7%), tuition fees (+8.1%) and homeowners’ insurance premiums (+11.0%) were the key factors in this increase. Lower prices for leasing of automotive vehicles (-7.5%), traveller accommodation (-5.4%) and photographic equipment (-1.2%) were the only downward pressure exerted.

Decreases in the durable (-1.3%) and non-durable (-0.2%) goods indexes led to a 0.4% decline in the goods index from July to August 2004, despite the increase in the semi-durable goods index (+0.6%).

From July to August 2004, the cost of services rose 0.1% on average. A large part of this increase came from higher mortgage interest costs, rents and restaurant meal prices.