Analysis

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Consumer prices rose 0.4% in the 12 months to April 2009, down from the 1.2% increase in March.

While upward pressure on the Consumer Price Index (CPI) came primarily from food, the slowdown was due mainly to price declines for energy and reduced upward pressure from non-energy shelter components.

Excluding food, the CPI fell 1.1% in the 12 months to April. Excluding energy, the CPI rose 2.4% over the same period.

Food prices rose 7.1% during the 12-month period to April, slower than the 7.9% rise in March.

Shelter costs rose 0.2% during the 12-month period to April after increasing 2.1% in March. A sharp decline in natural gas prices mitigated growth in the shelter index in April. The 12-month change in the shelter price index has been slowing since July 2008.

Transportation costs fell 8.0% in the wake of year-over-year declines in prices for both gasoline and passenger vehicles.

12-month change: Food costs remain high but shelter costs slow and energy costs decline

Of the eight major components in the CPI, seven recorded increases in the 12 months to April: food; shelter; household operations, furnishings and equipment; clothing and footwear; 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.

Food costs continued to be pushed up primarily by the price of food purchased from stores, which rose 8.3%. This was slower than the 9.5% rise observed in March.

Prices increases for food were widespread in the 12 months to April. Large increases were recorded for fresh vegetables (+26.0%), fresh fruit (+16.8%), cereal products (+9.6%), beef (+9.0%) and chicken (+9.0%).

A 12-month price increase of 43.3% for potatoes pushed up vegetable prices. This occurred largely as a result of recent poor harvests in Canada that led to a reduction in supply.

The slower pace of increase in shelter costs was due primarily to a drop in prices for natural gas and to slowdowns in mortgage interest costs and electricity prices.

Natural gas prices fell 17.5% in the 12 months to April, following a 9.5% increase in March. Natural gas prices fell in most provinces, especially in Alberta and Ontario where large drops largely accounted for the overall decrease.

The mortgage interest cost index, which measures the change in the interest portion of payments on outstanding mortgage debt, rose 3.2% in April compared with April last year. This was slower than the 4.2% rise posted in the 12 months to March. Advances in the mortgage interest cost index have been slowing since they reached a peak of 9.0% in June 2008, reflecting the downward trend in mortgage interest rates and housing prices.

Electricity prices slowed from a 12-month growth rate of 3.1% in March to 1.0% in April.

Also dampening the increase in costs for shelter were declines for homeowner’s replacement costs and prices for fuel oil and other fuels.

Homeowner’s replacement costs represent the worn-out structural portion of housing and are estimated using new housing prices (excluding land). They declined 2.8% in April, on the heels of a 2.1% drop in March. This was the largest drop since July 1991.

Prices for fuel oil and other fuels declined 33.5% in April after falling 32.9% in March.

Gasoline prices fell 24.7% from April 2008 to April 2009 following a 12-month decline of 21.0% in March. The 12-month decline in April was due more to high prices in 2008 than to recent developments. On a month-to-month basis, gasoline prices rose 1.0% from March to April.

The cost of purchasing and leasing passenger vehicles fell 8.3% in April, following a 7.4% year-over-year drop in March.

An increase in passenger vehicle insurance premiums tempered the overall decline in costs for transportation.

Year-over-year consumer prices slow in all provinces

Compared with March, growth in consumer prices slowed in all provinces in the 12 months to April, with the largest slowdowns in Alberta, Ontario and Saskatchewan.

In Alberta, consumer prices fell 0.7% year-over-year in April after increasing 0.9% in the 12 months to March. The slowdown was due primarily to steeper declines in prices for natural gas, which fell 36.9% in the 12 months to April, larger than the 19.3% drop observed in March. Along with electricity prices, which declined 16.0% in April in Alberta after rising 0.5% in March, larger price drops for gasoline also contributed to the slowdown in Alberta.

In Ontario, consumer prices rose 0.6% in the 12 months to April, compared with the 12-month rate of growth of 1.8% in March. This slowdown was due primarily to a 12-month decline of 16.9% in prices for natural gas, following a 20.3% rise in March. Larger year-over-year price declines in April compared with March for gasoline also contributed to the slowdown.

While components responsible for the change in consumer prices varied considerably, rising food prices were the main upward contributor in all provinces. The main downward contributors were declines in the price of gasoline and passenger vehicles.

Month-to-month seasonally unadjusted change: Slight fall

Consumer prices prior to seasonal adjustment fell 0.1% from March to April, after rising 0.2% from February to March.

A drop in prices for natural gas (-20.0%), women’s clothing (-4.1%) and to purchase and lease passenger vehicles (-1.0%) were the major downward contributors. Natural gas prices fell in all provinces except Manitoba, where natural gas prices were little changed. A 27.0% decline in Ontario was largely responsible for the overall drop.

A second consecutive month-to-month drop in mortgage interest costs (-0.2%) also kept prices down in April.

Dampening the overall drop in the monthly CPI was a 1.0% rise in prices for gasoline from March to April. This was the fourth consecutive monthly increase.

The monthly change in consumer prices in Ontario (-0.4%) and Saskatchewan (-0.4%) fell into negative territory in April, after posting increases in March.

Consumer price growth in Alberta remained in negative territory in April, falling 0.4% after recording a drop of 0.5% in March.

Consumer prices in Newfoundland and Labrador, Prince Edward Island and Nova Scotia gained speed from March to April due to monthly price increases for fuel oil and other fuels.

In Manitoba, a larger price increase for gasoline and a smaller drop in the price to purchase and lease passenger vehicles were primarily responsible for the pick up in consumer price growth from March to April.

Seasonally adjusted monthly CPI falls

On a seasonally adjusted monthly basis, the CPI fell 0.3% from March to April, after falling 0.2% from February to March. April’s fall was due primarily to a 1.0% drop in the shelter price index. Tempering the fall was a 0.2% increase in prices for food.

Excluding food and energy, the seasonally adjusted monthly CPI posted no change from March to April, after increasing 0.1% in the previous period.

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

The Bank of Canada's core index advanced 1.8% over the 12 months to April, down from the 2.0% rise in March.

On a month-to-month basis, the core index prior to seasonal adjustment increased 0.1% in April, following the 0.3% increase posted from February to March.

The seasonally adjusted monthly core index increased 0.2% from March to April, after posting no growth from February to March.