Twelve-month percentage change in the CPI: +3.9%

Twelve-month percentage change in the CPI excluding energy: +3.5%

In December 2002, Canadian consumers paid 3.9% more than they did in December 2001 for the goods and services included in the Consumer Price Index (CPI) basket. Although the base effect (see box) in December was not as pronounced as in November, it was still present. However, the slowdown in the 12-month increase in the CPI from 4.3% in November to 3.9% in December was caused mostly by a tumble in the Ontario electricity index. This decline was the result of legislation passed in December 2002 by the Ontario government, which reduced electricity rates and included a $75 refund. The CPI excluding energy filters out the base effect and the impact of the electricity refund in Ontario. In December, the 12-month increase in this index remained at 3.5%, the same as in November.

All-items Index, Canada

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

Important factors contributing to December's 12-month increase in the CPI excluding energy included automotive vehicle insurance premiums, cigarettes, homeowners' replacement cost, rent, purchase of automotive vehicles, and homeowners' insurance premiums. Lower mortgage interest cost moderated the increase in the index.

The energy price index rose 7.1% from December 2001 to December 2002, whereas it had jumped 14.0% from November 2001 to November 2002. This deceleration was caused mostly by the electricity index for Ontario plummeting by 42.0%, as Ontario consumers received a $75 refund in December 2002. The remaining slowing down effect came from natural gas prices for which the price increase decelerated to 2.6% in December from 14.5% in November. Indeed, gasoline prices were still 20.8% higher than in December 2001, although they had decreased from November to December 2002. Fuel oil prices posted a 12-month increase of 17.2%.

In December, the largest provincial 12-month increase was registered in Alberta (+8.7%). A large part of this rise is due to the increase of 57.0% in automotive vehicle insurance premiums and of 102.2% in natural gas prices. In the case of natural gas, the index level for December 2002 is compared to a level unusually low in December 2001 (base effect), since consumers benefited from the remaining portion of a one-time credit introduced in November 2001.

The smallest increase (+2.8%) was posted by Ontario. A 42.0% drop in the electricity index was the main factor explaining the fact that this increase is below the national average.

The annual average CPI went up by 2.2% from 2001 to 2002

In 2002, the annual average All-items CPI increased 2.2%, a slightly slower rate of increase than the 2.6% observed for 2001. Annual average indexes are calculated by averaging index levels over the 12 months of a calendar year. Tables 5A et 5B are showing changes in annual average indexes.

Excluding energy, the All-items index rose 2.8% on average in 2002, compared with a 2.4% increase on average the year before. These increases are almost twice as large as the ones observed from 1996 to 2000, which remained at 1.4% and 1.5%.

Energy prices declined on average 2.0% in 2002, following a 3.3% average increase in 2001, and a substantial 16.2% gain in 2000. Lower energy prices in 2002 were largely the result of an 18.1% drop in natural gas prices. This decrease contrasts with the 29.6% jump in 2001. An 8.1% decline in fuel oil prices, as well as a 0.9% slip in gasoline prices, also helped push the average energy index down in 2002. The only factor to moderate these declines was a 7.7% hike in the electricity index.

Among the major components of the CPI, alcoholic beverages and tobacco products contributed the most to the annual average increase in the CPI in 2002. After rising 7.7% in 2001, it climbed 17.6% in 2002. The jump in cigarette prices, induced by hikes in federal and provincial taxes throughout the year, accounted for at least three-quarters of this increase.

Ranking second among the components contributing to the increase in the annual average CPI, is transportation with a rise of 2.8% in 2002, compared to 0.1% in 2001. The 13.2% increase in automotive vehicle insurance premiums, as well as the 8.0% jump for air transportation costs explained the largest part of the rise in the transportation index in 2002.

Food prices rose on average 2.6% in 2002, after climbing 4.5% in 2001. These increases are significantly higher than those of the previous three years which remained between 1.3% and 1.6%. Contributing the most to the 2002 increase were meals purchased from table-service restaurants, fresh vegetables (especially potatoes), milk products, bakery products, beef and fresh fruit.

The shelter index was up 0.9% on average in 2002, following a 3.7% increase in 2001. The strongest upward pressures in 2002 came from electricity, homeowners' replacement cost and rent. However, drops in natural gas prices and mortgage interest cost partially neutralized these increases.

In 2002, the annual average index for recreation, education and reading rose 1.6%, an increase comparable to that of 2001 (+1.5%). Higher travel tour prices, university tuition fees, cablevision rates, and spectator entertainment admission fees are mostly responsible for the 2002 increase. Moderating this rise were lower prices for traveller accommodation, as well as computer equipment and supplies.

The annual average index for household operations and furnishings also rose (+1.4%). The most important contributors to this increase were telephone services, other household services, as well as pet food and supplies.

The health and personal care component (+1.1%) contributed mildly to the rise in the All-items annual average index. Half of this increase came from a 3.6% rise in dental care prices.

The only downward pressure on the All-items annual average index came from the clothing and footwear component (-0.8%). The 1.2% declines registered for the clothing index and the footwear index were only partially neutralized by a 2.7% rise in the index for clothing material, notions and services.

Monthly percentage change in the CPI: -0.3%

Monthly percentage change in the CPI excluding energy: +0.3%

From November to December 2002, the All-items CPI fell by 0.3%, after having edged up by 0.2% from October to November. The most significant downward pressure on the CPI was exerted by the decline in Ontario's electricity index. In contrast, the CPI excluding energy was up 0.3%.

Lower overall clothing prices and a decrease in the price of gasoline were other important factors pulling down the All-items CPI. However, higher automotive vehicle insurance premiums and fresh vegetable prices attenuated these declines.

The 18.7% tumble in the electricity index for Canada was almost entirely attributable to the 50.0% drop in the electricity index for Ontario. The new Ontario government legislation set the price of electricity at 4.3¢ per kilowatt-hour starting on December 1, 2002 and makes provision for refunds of amounts paid in excess of the 4.3¢ since May 1, 2002. A first refund of $75 was mailed to Ontario consumers in December, reducing substantially the average consumer bill used to calculate the CPI. To obtain more information on how the changes introduced by this new legislation will be dealt with in the CPI, please contact us at 1 866 230-2248.

Clothing prices were 3.6% lower in December than in November, because of pre-Christmas sale prices. This monthly decrease was the largest registered in a month of December since the inception of the series in 1982. Lower prices were observed in all provinces, price decreases ranging from 1.0% in Newfoundland and Labrador to 9.1% in Nova Scotia.

In December, consumers paid 2.6% less for gasoline than in November 2002, bringing about a second consecutive monthly decrease. Gasoline prices were lower in all provinces. Price decreases ranged from 1.3% in Nova Scotia to 7.6% in Manitoba and were generally more pronounced in western Canada.

Automotive vehicle insurance premiums increased 6.2% in December. The CPI tracks insurance premiums for a four-year-old car. Most of the observed increase can be attributed to adjustments reflecting the fact that we now track the premiums for a 1999 automotive vehicle model instead of a 1998 model.

Prices for fresh vegetables jumped 5.0% in December 2002, mainly because of a 25.9% leap in the price of tomatoes. Generally, the holiday season put upward pressure on the prices of fresh vegetables. Where tomato prices were concerned, this increase in demand was combined with limited supply because of poor weather affecting crops in Florida.

The seasonally adjusted CPI declined by 0.2% from November 2002 to December 2002

After adjustment for seasonal variations, the All-items CPI edged down by 0.2% from November to December 2002, following an increase of 0.5% in November. The leading factor contributing to this downward movement was the drop in the shelter index (-1.2%), pushed down by the $75 refund to electricity consumers of Ontario. Other factors included lower indexes for clothing and footwear (-0.9%), and alcoholic beverages and tobacco products (-0.1%). These decreases were partially counterbalanced by increases in the indexes for transportation (+0.8%), food (+0.2%), household operations and furnishings (+0.2%), health and personal care (+0.2%), and recreation, education and reading (+0.1%).

Special Aggregates

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

From December 2001 to December 2002, the prices of the goods and services included in the All-items index excluding the 8 most volatile components as defined by the Bank of Canada, rose 2.7%. The drop in Ontario's electricity index accounted for much of the deceleration in this index from 3.1% in November to 2.7% in December.

From November to December 2002, the All-items index excluding the 8 most volatile components as defined by the Bank of Canada slipped 0.5%, mainly because of the fall in Ontario's electricity index.

Energy

From December 2001 to December 2002, the energy price index rose 7.1%. Indexes for all components increased with the exception of electricity, which dropped 12.8%. Higher prices for gasoline (+20.8%) and fuel oil (+17.2%) explained much of this 12-month increase in the energy price index.

From November to December 2002, energy prices decreased 6.3%, a more substantial drop than the 1.6% slip observed in November 2002. It can be explained by the fall in the indexes for electricity (-18.7%) and gasoline (-2.6%), which was only marginally offset by higher natural gas prices (+2.0%).

Goods and services

In December 2002, the 12-month percentage change in the goods index increased 3.4%, mainly because of a 5.3% hike in prices for non-durable goods. Strong price increases for gasoline and cigarettes accounted for over half of the increase in the non-durable goods index. However, this increase was slowed down by the plummeting electricity index. The durable goods index also edged up (+1.1%), pushed by higher prices for automotive vehicles, although not to the same extent as the non-durable goods index. The semi-durable goods index receded by 0.9%, mainly because of lower clothing prices.

The services index rose 4.3% from December 2001 to December 2002, mainly because of higher automotive vehicle insurance premiums, homeowners' replacements cost, and rent. Lower mortgage interest cost was the only factor significantly offsetting the 12-month increase in the services index.

From November to December 2002, the goods index decreased 1.4%. Lower prices for non-durable goods (-1.6%), semi-durable goods (-2.6%), and durable goods (-0.2%) all contributed to this decrease. Falling electricity and gasoline indexes accounted for much of the decrease in the non-durable goods index. Widespread lower clothing prices accounted for the drop in the semi-durable goods index, while the decrease in the durable goods index was caused mainly by lower prices for furniture, as well as sporting and athletic equipment.

Largely because of higher automotive vehicle insurance premiums, consumers paid 0.6% more for services in December 2002 than in November 2002.