Analysis

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Consumer prices on average rose 1.4% in the 12 months to February 2009, slightly faster than the 1.1% increase observed in January.

The upward pressure on the Consumer Price Index (CPI) came primarily from two sources: higher food and shelter costs.

Food prices, the largest factor, increased 7.4% during the 12-month period to February, on the heels of a 7.3% increase in January. Shelter costs, the second largest, increased 3.0%, slightly slower than the 3.3% rise in January.

These gains offset lower transportation costs, which continued to exert strong downward pressure on consumer prices in February. Transportation costs were down as a result of lower prices for gasoline and for purchasing and leasing passenger vehicles.

Gasoline prices in February 2009 were 19.7% below levels in February last year. Excluding gasoline, the CPI rose 2.5% in the 12 months to February. Overall, energy prices fell 8.8% during the 12-month period to February, less than the 10.9% fall in January.

12-month change: Drop in transportation costs partly offsets higher food prices

Of the eight major components in the CPI, six recorded increases in the 12 months to February: food; shelter; household operations, furnishings and equipment; health and personal care; recreation, education and reading; and alcoholic beverages and tobacco products.

Out of these major components, upward pressure on the CPI came largely from an increase in prices for food. Excluding food, the CPI rose 0.2% in the 12 months to February. Rising shelter costs were the second largest upward contributor to the increase in the CPI.

Sustained declines in transportation costs (-5.8%) partly offset rising prices for food and shelter items. Continuing price declines for clothing and footwear items also helped to temper consumer price increases in the 12 months to February.

The cost of food continued to be pushed up primarily by prices for food purchased from stores, which rose 8.9%. The main contributors were a 25.8% hike in the price of fresh vegetables, a 9.7% rise in the prices of bakery and cereal products, and a 6.1% increase in meat prices.

February’s increase in costs for shelter was due primarily to higher mortgage interest costs and prices for household utilities. Mortgage interest costs, which are a function of housing prices and interest rates, and which take account of the fact that most homeowners do not change houses or re-contract their mortgages very frequently, were up 5.0% in the 12 months to February. This increase was largely the result of higher housing prices.

The cost of household utilities rose 4.9% as a result of increasing prices for water (+9.4%), natural gas (+14.4%) and electricity (+4.5%). These gains were tempered by declines in prices for fuel oil and other fuels, especially in Atlantic Canada.

The transportation price index fell largely as a result of falling gasoline and motor vehicle prices.

February’s 12-month decline of 19.7% in gasoline prices was slower than the 12-month decline of 23.5% in January. This slowdown occurred largely because pump prices rose 5.6% on a monthly basis from January 2009 to February 2009.

The cost of purchasing and leasing passenger vehicles fell 6.4% in February, compared with an 8.2% year-over-year drop in January. The slowdown occurred as a result of slight increases in manufacturers’ suggested retail prices and minor clawbacks in incentives offered by manufacturers and dealers.

The declines in prices for gasoline and for purchasing and leasing passenger vehicles were partly offset by increases in prices for passenger vehicle insurance and air transportation.

Prices for clothing and footwear fell 0.5% in the 12 months to February, after falling 0.4% in January. A 1.7% decrease in clothing prices largely accounted for February’s drop.

Jewellery prices rose 9.9% in the 12 months to February, primarily as a result of rising prices for gold.

Provinces: Fastest increases in consumer prices on the Prairies

Growth in consumer prices rose faster in most provinces in February, due largely to smaller price drops for gasoline. Consumers in the three Prairie provinces faced the fastest increases in consumer prices in the 12 months to February.

Consumers in Saskatchewan paid 2.6% more on average in February, while those in Alberta and Manitoba paid 2.1% and 1.7% more, respectively.

In all three cases, the primary contributor was higher mortgage interest costs. In Alberta and Manitoba, another factor was a rise in the cost of purchasing passenger vehicle insurance. In Saskatchewan, a major factor was a 22.4% rise in natural gas prices.

The 12-month change in consumer prices was slowest in New Brunswick (+0.3%) and Nova Scotia (+0.4%) in February. This was the result of more moderate price increases for shelter and larger price declines for gasoline, fuel oil and other fuels and to purchase and lease passenger vehicles than in most other provinces.

Consumers in Newfoundland and Labrador (+0.9%), Prince Edward Island (+1.0%) and Quebec (+0.8%) also realized slower growth in the CPI compared to the National average (+1.4%).

Elsewhere, consumer prices in Ontario (+1.5%) and British Columbia (+1.5%) were more in line with the change in the National average CPI.

Month-to-month seasonally unadjusted change: Largest increase since June 2008

Consumer prices rose 0.7% from January to February, after falling 0.3% from December to January. This was the first increase in the month-to-month CPI since September 2008 and the largest since the 0.7% rise in June 2008.

The reversal in February was largely due to prices to purchase and lease passenger vehicles. A sharp 5.3% decline in the price to purchase and lease passenger vehicles in January had held down prices in that month. No such decline was observed in February; instead, vehicle prices were essentially unchanged from January’s levels, edging up 0.1%.

A 5.6% rise in prices for gasoline also contributed to February’s monthly rise, following on a 5.0% increase from December to January. In spite of these recent increases, gasoline prices were still 37.3% below the heights they scaled in July 2008.

A 14.5% increase in prices for travel tours also contributed to February’s rise. Increases in travel tour prices are typical for this time of year.

Price declines for fresh fruit (-4.8%) and fuel oil and other fuels (-4.8%) helped to ease consumer prices in February.

While all provinces posted an increase in consumer prices in February, the largest increases were posted in Prince Edward Island (+1.4%) and Alberta (+1.1%). Stronger price increases for energy in these provinces were largely responsible.

In Alberta, a 13.0% rise in natural gas prices accounted for the higher rise in consumer prices. Lower price drop for fuel oil and other fuels in Prince Edward Island compared to the rest of the country accounted for the greater rise.

Newfoundland and Labrador (+0.4%) and British Columbia (+0.4%) posted the smallest increases in consumer prices.

Seasonally adjusted monthly change: First increase in five months

On a seasonally adjusted monthly basis, consumer prices rose 0.4% from January to February, halting four monthly declines. A 1.3% rise in the transportation index in February, after falling 1.4% in January, largely accounted for the upturn in February. Higher food prices also contributed to February’s rise.

Excluding food and energy, seasonally adjusted consumer prices rose 0.3% from January to February, following a monthly decline of 0.2% in January.

12-month change in the Bank of Canada’s core index holds steady

The Bank of Canada's core index advanced 1.9% over the 12 months to February, identical to the increase posted in January.

On a month-to-month basis, the core index prior to seasonal adjustment rose 0.5%, following the 0.4% decrease from December to January. The larger increase was due primarily to the 0.1% rise in prices to purchase and lease passenger vehicles, after the 5.3% drop recorded in the previous month. Increasing prices for travel tours also contributed to the upturn.

The seasonally adjusted monthly core index rose 0.4% from January to February, after falling 0.3% from December to January. The upturn was due primarily to a rise in prices to purchase and lease passenger vehicles from January to February, which fell from December to January.