Highlights

In December 2004, Canadian consumers paid 2.1% more than in December 2003 for the goods and services included in the Consumer Price Index (CPI) basket. This increase follows a 2.4% rise in November.

Gasoline prices were the main reason behind the slowdown in the increase of the All items index between November and December. The 12-month increase in the All-items index excluding energy remained stable at 1.6% in December.

Since October 2004, the gasoline price index has dropped from 158.4 to 142.7. Because the index was relatively stable between October and December of last year, the gap between its 2003 and 2004 levels diminished, bringing the 12-month rise of 20.3% in October down to 12.1% in December.

Gasoline, Canada, Indexes 1992=100

The All-items index excluding the eight volatile components identified by the Bank of Canada rose by 1.7% between December 2003 and December 2004, slightly more than in November 2004 when the 12-month increase was 1.6%.

Between November and December, the All-items index dropped 0.2 %, following a 0.4% increase in November. This reversal is largely attributable to a much smaller increase in purchase and leasing prices for automotive vehicles in December (+0.9%) than in November (+6.4%).

On a monthly basis, the All-items index excluding the eight volatile components identified by the Bank of Canada decreased 0.1%, whereas it had risen 0.5% in November.

Twelve-month percentage change in the CPI: +2.1%

Twelve-month percentage change in the CPI excluding energy: +1.6%

In December, the CPI registered a 2.1% increase over December 2003. Upward pressure was exerted primarily by gasoline prices, homeowners’ replacement cost, restaurant meal prices, and the purchase and leasing of automotive vehicles.

These increases were moderated, however, by lower prices for computer equipment and supplies, natural gas, automotive vehicle insurance premiums, and women’s and men’s clothing.

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

On average, gasoline prices in December 2004 were 12.1% higher than in December 2003. They had increased 17.7% between November 2003 and November 2004. Residents of Manitoba (+25.5%) experienced the largest increase, followed closely by those of Alberta (+23.8%) and Prince Edward Island (+22.6%). The smallest increases were noted in Ontario (+9.0%) and Quebec (+9.3%).

Homeowners’ replacement cost, which represents the worn out structural portion of housing and is estimated using new housing prices (excluding land), rose 6.1% from December 2003. Costs for construction materials and for transporting these materials, along with demand for labour in the construction industry, were factors that caused prices to rise.

Canadian consumers paid 2.8% more for restaurant meals in December 2004 as compared with December 2003.

The index for the purchase and leasing of automotive vehicles was up 1.8% from December 2003 because of smaller incentives being offered by some manufacturers.

A number of factors exerted a moderating effect on the 12-month increase in the All-items index. These included the index for computer equipment and supplies, which dropped by 18.8% since December 2003.

Natural gas prices were down 5.7% between December 2003 and December 2004, largely as a result of a 15.0% decrease in Ontario.

A 1.7% reduction in automotive vehicle insurance premiums also exerted a dampening effect on the 12-month increase in the All-items index. This decline follows in the wake of legislative changes in the Atlantic provinces, Ontario and Alberta.

Decreases were noted in the indexes for women’s clothing (-3.1%) and men’s clothing (-2.4%) as compared with December 2003. Prices for men’s clothing were lower in all provinces except Saskatchewan, while the decrease in prices for women’s clothing was less widespread.

Percentage change in the annual average CPI: +1.9%

Percentage change in the annual average CPI excluding energy: +1.4%

For 2004 as a whole, consumers paid an average of 1.9% more than they did in 2003 for the goods and services included in the CPI basket. This was a smaller increase than the 2.8% annual average rise measured in 2003.

The main contributors to this slowdown were automotive vehicle insurance premiums (+1.5% in 2004 compared to +22.1% in 2003), natural gas (-2.1% in 2004 compared to +30.1% in 2003), cigarettes (+7.4% in 2004 compared to +16.2% in 2003), computer equipment and supplies (-16.7% in 2004 compared to -10.0% in 2003) and purchase and leasing of automotive vehicles (-1.4% in 2004 compared to -0.7% in 2003).

The 1.5% annual average rise in the All-items index excluding the eight volatile components identified by the Bank of Canada marked the smallest increase in this index since 2001. Advances of 2.2% were recorded in 2003; 2.4% in 2002 and 2.0% in 2001.

An annual average index is obtained by averaging the index levels of the twelve months of the calendar year. The change in an annual average index should not be confused with the 12-month change which compares the index level for a given month to its level for the same month of the previous year. Two tables showing the percentage changes in annual average indexes appear on page 23 of this publication.

Monthly percentage change in the CPI: -0.2%

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

The CPI slipped 0.2% between November and December, its level dropping from 125.7 to 125.4. Lower prices for gasoline, women’s and men’s clothing, fuel oil and traveller accommodation accounted for most of this reduction. Higher prices for the purchase and leasing of automotive vehicles, fresh vegetables and air transportation moderated this decrease.

With the exception of October, gasoline prices have been continually declining since June 2004. From November to December 2004, gasoline prices were down 5.2%. Lower prices were recorded in all provinces.

Again this month, consumers took advantage of numerous discount sales in the clothing sector. In general, prices for women’s clothing were down 3.5%, while those for men decreased 2.4%. The index for women’s clothing was at its lowest level since December 1990.

Canadian consumers enjoyed a small break in December, when fuel oil prices decreased 3.5%, following substantial increases since September 2004. Prices decreased in all provinces except in Nova Scotia, where they remained stable.

Prices for traveller accommodation dropped 2.9% in December, in keeping with the usual pattern for this month of the year.

The index for the purchase and leasing of automotive vehicles rose 0.9% from November to December 2004. This monthly increase was caused by a reduction in the incentives offered by some manufacturers in December.

Prices for fresh vegetables climbed 7.4% between November and December 2004. After skyrocketing 50.1% in November 2004, tomato prices rose an additional 24.8% in December. Prices for lettuce (+18.8%) and potatoes (+4.1%) also served to push this index up, while lower prices for “other fresh vegetables” (-0.4%) offset these increases to a slight extent.

Canadian travellers faced airfares that were 3.7% higher in December 2004 in light of the change in fares from low season to high season.

The seasonally adjusted CPI remained stable between November and December

Seasonally adjusted, the CPI remained unchanged from November to December 2004.

Upward pressure came from the indexes for shelter (+0.1%), health and personal care (+0.4%), recreation, education and reading (+0.2%), as well as household operations and furnishings (+0.2%).

The index for food, as well as that for alcoholic beverages and tobacco products remained stable in December.

The indexes for transportation (-0.6%), and clothing and footwear (-0.4%) counterbalanced the upward pressure on the All-items index.

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 1.7% between December 2003 and December 2004. The main contributors to this increase were homeowners’ replacement cost (+6.1%), and prices for restaurant meals (+2.8%) and the purchase and leasing of automotive vehicles (+1.8%). These increases were partly offset by lower prices for computer equipment and supplies (-18.8%) and automotive vehicle insurance premiums (-1.7%).

From November to December 2004, the All-items index excluding the eight volatile components identified by the Bank of Canada decreased 0.1%, primarily as a result of lower prices for women’s clothing (-3.5%), men’s clothing (-2.4%) and traveller accommodation (-2.9%). Higher prices for the purchase and leasing of automotive vehicles (+0.9%), and to a lesser extent, higher homeowners’ replacement cost (+0.5%) and restaurant meal prices (+0.2%) were the primary factors that served to dampen this decrease.

Energy

The energy index climbed 8.1% between December 2003 and December 2004. The upward pressure came primarily from gasoline prices (+12.1%). Higher prices for fuel oil (+33.3%) and electricity (+4.2%) as well as for fuel, parts and supplies for recreational vehicles (+8.6%) also contributed to pushing the index up. These increases were offset to some degree by a decrease in natural gas prices (-5.7%).

On a monthly basis, all components of the energy index decreased, pushing the index down by 2.9%. Gasoline prices (-5.2%) played the largest role in this decrease, followed by prices for fuel oil (-3.5%), electricity (-0.2%), fuel, parts and supplies for recreational vehicles (-2.5%) and natural gas (-0.4%).

Goods and services

Prices in the goods sector rose 2.1% between December 2003 and December 2004.

Almost all of this increase can be accounted for by the 4.1% rise in prices for non-durable goods. In December, the strongest upward pressure on this index came once again from gasoline prices, which jumped 12.1% as compared with December 2003. Higher prices for fuel oil (+33.3%) and electricity (+4.2%) were also factors. These price increases were moderated mainly by a decrease in natural gas prices (-5.7%). The index for durable goods inched up by 0.1% only. The upward pressure caused mainly by higher purchase prices for automotive vehicles (+2.6%) was partly offset by a reduction in prices for computer equipment and supplies (-18.8%). The 1.5% decrease in the index for semi-durable goods exerted a slight dampening effect on the goods index. Lower prices for clothing for women (-3.1%), men (-2.4%) and children (-5.0%) accounted for a large part of this decrease. Higher prices for newspapers (+4.5%), school textbooks and supplies (+2.2%) and books (excluding textbooks) and other printed matter (+2.8%) moderated the decrease.

The services index rose 2.2% from December of last year. Increases in homeowners’ replacement cost (+6.1%), restaurant meal prices (+2.8%) and property taxes (+4.3%) were the main factors behind this increase. Downward pressure came mainly from lower prices for automotive vehicle insurance premiums (-1.7%), automotive vehicle leasing (-3.0%) and traveller accommodation (-3.7%).

The goods index slipped 0.5% between November and December 2004. The increase in the durable goods index (+0.3%) moderated the reduction in the indexes for non-durable goods (-0.6%) and semi-durable goods (-2.1%) to a slight extent.

Between November and December 2004, the cost of services rose 0.2% on average. The price decreases for traveller accommodation (-2.9%) and automotive vehicle insurance premiums (-0.3%) were not sufficient to offset the impact of the increases, of which the largest part came from air transportation (+3.7%).