Twelve-month percentage change in the CPI: +3.2%

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

In October 2002, Canadian consumers paid 3.2% more than twelve months ago for the goods and services included in the Consumer Price Index (CPI) basket. This increase is considerably larger than the 2.3% rise observed in September. Excluding the effect of energy prices, the CPI increased by 2.9% between October 2001 and October 2002, following a 2.8% increase from September 2001 to September 2002.

Energy prices are almost entirely responsible for the change in the CPI's 12-month increase from 2.3% in September to 3.2% in October. Falling energy prices pushed the CPI down between September and October last year (base effect, see box). In addition, energy prices pushed the CPI up between September and October this year, further widening the gap between the index level of October 2001 and October 2002.

Energy prices increased by 5.6% between October 2001 and October 2002, exerting an accelerating effect on the All-items CPI for the first time in a year. In contrast, they had fallen 1.8% between September 2001 and September 2002. A 9.1% rise in the price of gasoline was the main factor underlying October's increase in the energy index, while the 9.8% rise in the price of electricity explains most of the rest of the increase. Natural gas prices exerted the only downward pressure on the energy index. They remained 10.8% lower than their October 2001 level, despite increasing for a third consecutive month.

Although energy prices were the main factor explaining why the
12-month increase in the CPI accelerated from 2.3% in September to 3.2% in October, their total impact on October's 12-month increase was still smaller than that of cigarette prices and automotive vehicle insurance premiums.

Cigarette prices rose by 42.0% over their level of October 2001. The change in cigarette prices over the past year is mainly attributable to the rise in provincial and federal taxes, which came into effect in the fall of 2001 and the spring of 2002. A rise in prices by manufacturers in October 2002 also contributed to the advance in the index. Automotive vehicle insurance premiums increased, on average, by 18.7%.

Homeowners' replacement cost and rent remained among the factors contributing to the 12-month rise in the All-items CPI in October, although their impact was considerably less than that of energy.

Other than natural gas prices (-10.8%), which helped contain the increase in the energy index, the decrease in mortgage interest cost
(-3.3%) constituted the most significant moderating effect on the
All-items CPI.

Monthly percentage change in the CPI: +0.3%

The CPI increased by 0.3% between September and October 2002. Since the beginning of the year, the monthly changes in the CPI ranged between 0.0% and 0.7%. In October, the main upward pressure came from an increase in natural gas prices, followed by increases in automotive vehicle insurance premiums, property taxes and gasoline prices. A decrease in traveller accommodation and electricity prices mitigated the upward pressure on the CPI. Without the effects of energy prices, the All-items index would have remained stable between September and October.

The natural gas index increased by 18.5% in October as a result of price increases in Ontario and Alberta. The 19.3% rise in Ontario was mainly due to higher transportation tolls for delivery from Western Canada, as well as to the elimination of a temporary storage refund. The 60.3% rise in Alberta prices was due to the increase in the cost of natural gas and to a full resumption of billing for subscribers in the northern sector of ATCO Gas, which includes Edmonton, at a time when the average consumer had fully used up (in September) the credit paid in March 2002.

Automotive vehicle insurance premiums advanced by 3.1%, especially under the influence of price increases in Quebec, Ontario and Newfoundland.

Over the past year, Canadians were faced with an average 2.2% increase in property taxes, including school taxes and special fees. Property taxes increased in every province. Residents of Newfoundland and Labrador (+7.6%) and Prince Edward Island (+7.0%) experienced the largest average increases. The increases in Newfoundland were generally due to an increase in the tax rate, whereas in Prince Edward Island, they were due to province-wide assessment reviews based on new market values. British Columbia (+3.5%), Nova Scotia (+3.2%), Saskatchewan (+3.0%), New Brunswick (+2.9%) and Ontario (+2.9%) residents faced more modest increases, while the weakest advances were recorded in Alberta (+1.0%), Quebec (+0.4%) and Manitoba (+0.3%). Changes in property taxes are reflected in the CPI once a year in October.

Gasoline prices rose on average by 1.6% between September and October 2002. Prices increased in all provinces, with the exception of the Prairie Provinces where they decreased, while they remained stable in Whitehorse and Yellowknife. The largest increase (+3.3%) was observed in Quebec, while the most notable decrease (-5.5%) was posted in Manitoba, the result of a price war in Winnipeg.

Although historically hotels have gradually reduced their rates in the fall, the 10.9% price drop from September to October 2002 is the second largest decrease for a month of October. The largest one (-12.0%) was recorded in October 2001, following the events of September 11, 2001. The October 2002 price decline was attributable to a weaker demand, mostly in large urban centres. October 2002 prices were still 5.0% lower than their level of October 2001. The 12-month change in the index has been negative since June 2001.

The 2.6% decrease in the electricity index for Canada was the largest monthly decrease observed since February 2001, when the government of British Columbia issued credits to consumers. The October drop was entirely attributable to the 6.5% drop in Ontario prices. The sale of electricity on an open market in this province is making prices more volatile. Ontario electricity prices remained 23.2% higher than their October 2001 level.

The seasonally adjusted CPI advanced by 0.4% between September 2002 and October 2002

After adjusting for seasonal variations, the All-items CPI rose by 0.4% between September and October 2002. The factors contributing to this rise were the increases in the indexes for alcoholic beverages and tobacco products (+1.2%), transportation (+1.0%), shelter (+0.7%), health and personal care (+0.2%) and household operations and furnishings (+0.1%). These increases were partially compensated by the drop in the index for food (-0.1%) whereas the indexes for clothing and footwear, as well as for recreation, education and reading remained unchanged.

Special aggregates

Energy

The energy index rose by 5.6% from October 2001 to October 2002. This was the first increase in this twelve-month index since last year. Gasoline and electricity price increases were more than enough to overcome the drop in natural gas prices. Fuel oil prices also increased over this period, although their impact on the energy index was far less significant.

From September to October 2002, the energy index jumped by 2.8%. Although this change may be attributed to increases in the prices of all components, except electricity, most of the increase was due to natural gas prices, which jumped by 18.5%.

Goods and services

Prices in the goods sector rose by 3.1% from October 2001 to October 2002, which was considerably more than the 1.7% increase posted in September. The non-durable goods sector (+5.2%) was the most important factor underlying this increase, which was fuelled by the increases in prices for cigarettes, gasoline and electricity in the past twelve months. Price increases for semi-durable goods (+0.4%) also contributed, although negligibly, to the rise in the goods index. Only the durable goods index fell (-0.2%), driven by price decreases for new automotive vehicle, as well as for computer equipment and supplies.

The cost of services, led by automotive vehicle insurance premiums, increased by 3.2%, under the pressure of almost across the board increases.

The monthly advance in the goods index was 0.4% from September to October 2002, reflecting price increases in the non-durable and semi-durable goods categories. The non-durable goods index increased by 0.7% as a result mostly of the advance in the prices of natural gas, gasoline and fuel oil, with lower electricity prices slightly counterbalancing the increases. Semi-durable goods prices increased by 0.1% in October. Price increases in men's clothing and toys, games and hobby supplies were the major factors underlying the advance, whereas women's clothing prices exerted downward pressure. The durable goods index fell (-0.2%) as a result of across the board decreases. Only the prices of wooden furniture, as well as those of videocassettes and videodisks mitigated the decrease in this category.

Prices of services rose by 0.2% from September to October 2002. This increase was resulting mainly from increases in automotive vehicle insurance premiums and property taxes being partially offset by the decrease in traveller accommodation prices.