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April 2008
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Analysis
Consumer prices accelerated for the first time in five months in April in the wake of higher gasoline prices and fewer incentives on passenger vehicles.
The Consumer Price Index rose 1.7% between April 2007 and April 2008, up from the 1.4% increase in March. This was the first acceleration of the all-items index since November 2007.
Gasoline was the main contributor to both the acceleration and the 12-month increase of the all-items index. Gasoline prices rose 11.6% between April 2007 and April 2008, compared with a 7.9% increase posted in the previous month.
The all-items index excluding gasoline increased by 1.3% during the 12-month period. A second contributing factor to the acceleration in April was less downward pressure from passenger vehicle prices. They declined in April, but at a much slower pace than in the previous month.
The 12-month change in the Bank of Canada’s core index, which is used to monitor the inflation control target, rose 1.5% in April, faster than the 1.3% increase in the preceding month. Less downward pressure from passenger vehicles prices contributed to this acceleration.
On a seasonally adjusted basis, the all-items index and the core index rose 0.4% between March and April 2008. The increase in the core index was the sharpest since May 2006.
12-month change: Gasoline is the main factor in the acceleration of the all-items index
The strongest upward pressure on the all-items index and its acceleration came from gasoline prices. Pump prices rose by 11.6% between April 2007 and April 2008, compared with a 7.9% increase over the previous period. The highest increases were posted in the Prairies.
The reduction of incentives offered by car manufacturers also contributed to the acceleration of the all-items index.
Another significant upward contributor to the increase in consumer prices in April was mortgage interest cost. Again in April, new housing prices exerted more upward pressure on this index than mortgage interest rates.
Prices for fuel oil and other fuels surged 36.9% in April, the fastest increase since September 2005 for these products derived from crude oil. In the Atlantic Provinces, this component exerted the strongest upward pressure on consumer prices.
Homeowner’s replacement cost, which represents the cost of maintaining a housing structure, rose 4.6%. This was weaker growth than increases posted in February and March.
The biggest jump occurred in Saskatchewan, although growth was slower than in the previous month. In Newfoundland and Labrador, homeowner’s replacement cost experienced the largest increase since February 1992. This province’s economy is experiencing growth as a result of the intensification of oil extraction and mining activities, combined with higher prices on world markets.
Prices for bakery products surged 10.4% between April 2007 and April 2008, the steepest rise since November 1981.
The decline in passenger vehicles prices mitigated, to some extent, the increase in the all-items index. The price of passenger vehicles went down 6.6% in April 2008 compared to the same month of the previous year, a less substantial drop than the 7.1% decline in March.
Prices for fresh vegetables continued to fall in April. Fresh vegetable prices were relatively higher at this period last year when supplies were hit by a frost in California. The appreciation of the dollar may have also helped lower prices of imported vegetables.
Women’s clothing prices declined 6.7%. Prices for computer equipment and supplies continued their downward trend in April, mainly because of lower prices for laptops.
Ontario continues to experience smallest price increase in April
Despite a 0.5 percentage point acceleration of the 12-month all-items index in Ontario between March and April, mainly due to higher gasoline prices, that province again posted the smallest increase in consumer prices (+1.3%).
Alberta and Saskatchewan recorded increases of 3.2%, which were the highest of all provinces. These increases mainly reflect higher new housing costs.
