Statistics Canada
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September 2008
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Analysis
Consumer prices rose 3.4% in the 12 months to September 2008, due largely to higher energy and food prices. This was a slightly slower pace than August’s 3.5% increase, when the pace of consumer price growth was the highest since March 2003. The seasonally-adjusted monthly CPI rose 0.2% from August to September.
The CPI excluding gasoline increased 2.2% in the 12 months to September; stripping away all energy components, the CPI advanced only 1.9%.
Of the eight major components of the CPI, shelter costs remained the primary contributor to the 12-month increase in consumer prices in September. Food costs replaced transportation as the second leading contributor. Transportation costs, now third, continued to be buoyed by higher gasoline prices, although lower prices for vehicles have had a moderating effect.
Increasing costs for mortgage interest, natural gas and fuel oil and other fuels continued to propel costs for shelter. Nearly all food items registered price increases, but it was bread and cereal products, fresh fruit and vegetables and dairy products that contributed the most to the rise in prices for food in September.
On a month-to-month basis, consumer prices before seasonal adjustment rose 0.1% in September, a reversal from the 0.2% drop recorded in August. Increasing prices for women’s clothing and tuition fees were the primary contributors to the growth in the monthly CPI.
The seasonally-adjusted monthly CPI rose 0.2% from August to September, up from the 0.1% increase posted for the previous period.
12-month change: Transportation costs ease but food prices gain momentum
A large upward contribution to the change in the 12-month CPI came from gasoline. Prices at the pump rose 26.5% in September and varied considerably during the month.
Mid September, gasoline prices rose by over 10 cents a litre in many regions of the country as hurricane Ike loomed over the Gulf Coast and caused a significant reduction in crude oil production. Consumers, however, received some relief as pump prices retreated towards the end of the month.
Helping to mitigate the increase in costs for transportation was a 9.3% decline in prices to purchase and lease passenger vehicles. This was the largest drop since February 1956. Overall, transportation costs rose 4.7%, a slowdown from the 5.8% rate of growth posted in August.
Out of the eight major components, prices for food posted the strongest growth and replaced transportation costs as the second major contributor behind shelter to the 12-month change in the CPI in September. Prices for food have been gaining momentum since the beginning of 2008. In the first nine months of 2008, prices for food are up 2.4% when compared to the same period in 2007. Overall, food prices in the 12 months to September rose 5.6%, an increase from the 4.5% rise recorded in August.
Rising prices for bakery and cereal products (15.5%) continued to exert the strongest upward pressure on prices for food. Also contributing to rising food costs were price increases for fresh fruit, vegetables and milk.
Prices for milk rose 6.6% in September after rising 5.4% in August. In July, the Canadian Dairy Commission approved an increase in the price that farmers receive for industrial milk (milk used in foods such as yogurt, cheese, butter and skim-milk powder) that became effective September 1.
Shelter costs (4.5%) continued to rise in September as a result of increases in mortgage interest cost and prices for some fuels (natural gas and fuel oil and other fuels). A 1.9% decline in electricity prices helped to offset increasing prices for other utility items. The drop in electricity prices was the largest recorded since November 2003.
Also helping to ease costs associated with shelter was the continual slowdown in homeowner’s replacement costs, which represents the worn-out structural portion of housing and is estimated using new housing prices excluding land. Homeowner's replacement costs eased to a growth rate of 1.8% in September, after rising 2.3% in August. Easing new housing prices have resulted in a slowing of this index since the relative highs recorded in late 2006.
The recreation, education and reading price index advanced 0.5% in September after rising 0.6% in August. Stronger price declines for computer equipment and supplies, video equipment, some other electronic items and to purchase recreational vehicles helped to offset increasing tuition fees.
Students paid 4.0% more in tuition fees in 2008, up from the 3.0% rise in 2007. Higher tuition fees in Quebec and Ontario accounted for most of this growth.
Out of the eight major components, clothing and footwear continued to remain the only downward contributor on the 12-month change in the CPI in September. Prices for clothing and footwear fell 1.3%, mainly the result of a 4.2% reduction in prices for women’s clothing.
The provinces: Consumers in Alberta receive some relief as consumer prices retreat
Consumer prices across the country varied considerably, from a low of 2.4% in New Brunswick to a high of 5.5% in Prince Edward Island. Four of the ten provinces realized a slowdown in consumer prices: Nova Scotia, New Brunswick, Manitoba and Alberta.
Consumer prices in Alberta registered the smallest increase in September since December 2005. Consumers in Alberta faced a 2.8% rise in consumer prices in September, down from the 4.0% rise posted in August. Easing prices for natural gas was the primary contributor to the slowdown. Natural gas prices in Alberta rose 29.6%, after rising by 73.7% in August.
Gasoline prices continued to put the most upward pressure on consumer prices in all provinces. Continual price declines to purchase and lease passenger vehicles remained the most significant downward contributor in all provinces.
Month-to-month change: Consumer prices bounce back after decline last month
Consumer prices rose 0.1% in September compared to August, up from the drop of 0.2% recorded in the previous period. Price increases for women’s clothing and tuition fees were the primary contributors to the upswing in consumer prices in September.
Prices for women’s clothing rose 5.0%, a trend typically observed during this time of the year when the new fall collection hits retail outlets. The 4.0% rise in the cost of a postsecondary education also drove up the monthly CPI.
Helping to mitigate the increase in the monthly CPI in September was price declines for natural gas (-9.3%) and air transportation (-10.1%). In addition to the seasonal effect from the off-peak travel season, the elimination of the fuel surcharge by certain air carriers also accounted for some of the drop in air transportation prices.
On a seasonally adjusted basis, consumer prices edged up 0.2% between August and September, up from the 0.1% increase posted for the previous period. Price gains were strongest for food and household operations and furnishing items. Seasonally adjusted price declines for shelter, transportation and clothing helped to mitigate the overall increase in September.
The rise of the Bank of Canada’s core index holds steady
The Bank of Canada's core index 1 advanced 1.7% over the 12 months to September, identical to the rate posted in August.
The monthly seasonally unadjusted core index rose 0.4% from August to September, after rising 0.3% in the previous period.
The seasonally adjusted monthly core index advanced 0.2% from August to September, after increasing 0.3% from July to August.
