Statistics Canada
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May 2008
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Analysis
Consumer prices rose 2.2% in May compared to May 2007, up from the 1.7% increase reported in April, as drivers faced significant increases in gasoline prices. The 0.5 percentage point acceleration in the all-items Consumer Price Index was the sharpest since September 2007.
The 2.2% increase in May was the highest since January 2008. It was due mostly to higher prices for gasoline, which rose 15.0% in May compared with the same month last year. This was considerably faster than the 12-month change of 11.6% posted in April. Excluding gasoline prices, the 12-month growth in May was 1.6%.
The Bank of Canada’s core index, which is used to monitor the inflation control target, rose 1.5% between May 2007 and May 2008, identical to the 12-month increase posted in April. Lower prices for passenger vehicles dampened the upward pressure on the core index.
On a monthly basis, the seasonally adjusted all-items index rose 0.6% between April and May 2008, while the seasonally adjusted core index edged up 0.1%. The seasonally adjusted all-items rose 0.5% and the seasonally adjusted core index increase 0.4% between March and April.
The 0.6% monthly increase in the all-items index was the fastest rate of growth since January 2006. It reflects mainly the increase of gasoline prices.
12-month change: Strong acceleration due to gasoline prices
The acceleration in consumer prices in May was mainly a reflection of the 12-month increase in gasoline prices. This acceleration in gasoline prices occurred as crude oil prices almost doubled between May 2007 and May 2008. Gasoline prices increased substantially across the country, rising the most in Québec and Ontario.
Higher mortgage interest costs were also a contributing factor to the rise in consumer prices in May. New housing prices continued to exert more upward pressure on this index than mortgage interest rates.
Prices for fuel oil and other fuels, which are products derived from crude oil, rose 49.3% in May compared with May 2007—the fastest increase since March 2003. The highest 12-month increase in prices for fuel oil and other fuels was posted in Québec (+60.4%).
Drivers saw their vehicle insurance premiums rise 6.3% between May 2007 and May 2008. A major part of this increase was due to periodic quality adjustments aimed at maintaining the age of vehicles that serve as the basis for evaluating insurance premiums.
Homeowner’s replacement cost, which represents the cost of maintaining a housing structure, rose 4.0% in May. This was the weakest increase since April 2002.
Canadians paid 1.9% more in May for store-bought food items compared with the same month last year, compared to the 0.9% increase in April.
Prices for bakery products increased 13.2%, the fastest 12-month rise since October 1981.
The 12-month price change for fresh vegetables continued to decline in May (-8.7%), but more slowly than in April (-17.3%). The appreciation of the dollar and the fact that supplies had been hit by frost in California in 2007 accounted in part for the decrease in prices for fresh vegetables. However, higher transportation costs for these commodities possibly alleviated the downward pressures to some extent.
Several components put downward pressure on the rate of growth in consumer prices. For example, the price to purchase and lease passenger vehicles declined 8.1% between May 2007 and May 2008. The strong Canadian dollar and an increase in manufacturers’ rebates on certain larger models of motor vehicles contributed to this decrease.
As was the case in April, the price of women’s clothing fell 6.7% in May. The downward trend in prices for computer equipment and supplies continued (-13.0%), although the decrease was the smallest since August 2003.
Fastest price increases in Prince Edward Island
Consumers in Prince Edward Island faced the fastest increase in prices between May 2007 and May 2008. Prices rose 4.1% in the province during that period, a sharp increase from the 12-month change of 2.6% posted in April.
Rising energy prices contributed substantially to the 1.5-percentage-point acceleration in Prince Edward Island. This acceleration was due mainly to upward pressure from fuel oil, gasoline and electricity prices.
In Alberta, a rise in the price of natural gas was the main factor driving up consumer prices which rose 3.7% in May.
The most moderate growth in consumer prices occured in Manitoba (+1.6%) and Ontario (+1.8%).
Non-seasonally adjusted monthly change: acceleration in the all-items index was mainly due to the price of gasoline
On a non-seasonally adjusted monthly basis, consumer prices rose 1.0% between April and May 2008, up from 0.8% in the preceding period. This was the sharpest increase since January 1991 when the GST was introduced.
Gasoline prices jumped 8.8% between April and May, the sharpest month-to-month rise since March 2007.
A 12.7% increase in prices for traveller accommodations also contributed to the growth in consumer prices. Higher prices for this component are typical at this time of the year.
Travellers faced a 5.4% increase in the price of airline tickets in May compared to April 2008, the sharpest month-to-month increase since December 2007. This was due in part to seasonal factors and to a premium charged by certain carriers to cover higher kerosene prices.
The price of fresh fruit (+7.5%) and vegetables (+6.5%) rose from April to May, possibly because of higher transportation costs.
Several factors put downward pressure on the monthly change in prices. These include a decline in prices to purchase and lease passenger vehicles, as a result of stepped-up incentives offered by manufacturers, especially on larger vehicles.
Lower prices for women’s clothing also slowed the monthly rise. These prices frequently decline at this time of the year, as retailers offer sales to make way for the next season’s collection.
