Prices Analytical Series:
An Analysis of the 2025 Consumer Price Index Basket Update, Based on 2024 Expenditures

Introduction

The Consumer Price Index (CPI) is the most recognized and widely reported measure of inflation in Canada, offering key insights into broader economic conditions. It measures changes in consumer prices over time by comparing the cost of a fixed basket of goods and services. The methodology used to calculate the CPI follows accepted international standards (see International Monetary Fund - Update of the Consumer Price Index Manual), and is subject to regular review, both internally and by external experts, and is adjusted as needed, to ensure it meets best practices.

Private and public pension programs, income tax deductions and some government social payments are adjusted using the CPI. The index is used as a deflator of various economic statistics to obtain estimates at constant prices, and as a tool for setting and monitoring economic policy. The CPI is also often used for indexation and contract escalation.

Each good or service in the CPI basket is assigned a weight that is proportional to its share of total consumption expenditure by Canadian households. The larger the basket weight, the more a price change of a given good or service will impact the headline CPI.

The CPI is a Laspeyres-type^Note price index, meaning that basket quantities are fixed to the reference period of the basket weights, which are estimates of consumer expenditures used for upper-level aggregation. To ensure the CPI remains representative of the price change experienced by Canadians, the basket weights must reflect how Canadians are spending their money. A fixed-basket price index, such as the CPI, can only account for shifts in consumer spending when the basket weights are updated. Therefore, scheduling basket updates at regular intervals allows the CPI to capture changing expenditure patterns.

The May 2025 CPI, to be released on June 24, will mark the introduction of updated basket weights in the calculation of the CPI. The 2025 basket update using 2024 expenditures will replace the 2023 expenditures that were introduced in June 2024. The continuity of the CPI series is maintained by chain linking^Note the corresponding indices obtained from consecutive baskets. This is done separately for each aggregate series, which is defined as the intersection of a product and a geographic area.

Data sources

The updated basket weights were derived primarily using consumer expenditures from the 2024 national Household Final Consumption Expenditure (HFCE)^Note series, replacing those derived from the 2023 national HFCE series. Household expenditures reported in the Survey of Household Spending (SHS) for reference period 2023 were used to supplement the HFCE expenditure data, mainly providing expenditure detail at lower levels of aggregation, including geographic aggregation.

Additional data sources were used to better inform expenditure weights for specific aggregates, or where HFCE or SHS data were unavailable. The updated basket weights reflect the highest quality expenditure data available, while still meeting timeliness requirements. Examples of additional data sources include:

• Retail scanner data
• Monthly Retail Trade Survey
• Office of the Superintendent of Financial Institutions
• Tourism performance indicators
• Inter-Urban Transit Survey
• Streaming and cable service usage reports
• Goods and Services Tax data
• Retail Commodity Survey
• Canada Mortgage and Housing Corporation
• Canadian Real Estate Association (CREA)
• New Motor Vehicle Sales Survey
• Monthly Urban Transit Survey
• Tuition enrolment
• Petroleum statistics

Composition of the CPI basket

The CPI classification of goods and services is organized according to a top-down hierarchical structure (see diagram below). At the top of the structure is the all-items CPI, which contains eight major components. Below the eight major components are intermediate-level aggregates, such as owned accommodation and operation of passenger vehicles, which provide more detailed insight into the sources of monthly and annual price change. Below these are basic aggregates and elementary aggregates. Basic aggregates are the lowest level published series (or unpublished sibling indexes of published series) and elementary aggregates are the lowest level indexes for which basket weights are assigned. Most elementary aggregates are unpublished; however, some are also basic aggregates, which are not aggregated below the published level. Currently there are 220 basic aggregates and 491 elementary aggregates.

Description for Figure 1

The Consumer Price Index classification is organized according to a top-down hierarchical structure, depicted in a pyramid chart with five levels.

• At the first level, or the top of the pyramid, is the “All-items Consumer Price Index”.
• Below at the second level of the pyramid are the eight major components which are:
  • Food;
  • Shelter;
  • Household operations, furnishings and equipment;
  • Clothing and footwear;
  • Transportation;
  • Health and personal care;
  • Recreation, education and reading;
  • Alcohol beverages, tobacco products and recreational cannabis.
• At the third level of the pyramid there are “Intermediate level aggregates”.
• At the fourth level of the pyramid there are “220 basic aggregates”.
• At the fifth and lowest level of the pyramid there are “491 elementary aggregates”.

Source: Statistics Canada, Consumer Prices program.

In addition to the review of the expenditure weights, a basket update also provides an opportunity to review and update other aspects of the CPI. This includes changing the CPI classification to ensure it best reflects consumer spending and the evolving range of products and services available for purchase. Elementary aggregates are added or deleted from the basket as consumption patterns change over time.

At the elementary aggregate level, the classification includes a sample of items that are chosen to characterize all products in that class. Representative products^Note are chosen with emphasis on items that are widely available and known to be among the most popular with consumers, ensuring that the items selected are representative of consumer purchases. The number of representative products assigned to an elementary aggregate can vary based on the basket weight of the aggregate, as well as the price variability and heterogeneity of products in that class. For instance, when pricing certain dry grocery products, such as cereal, representative products typically include both brand-name and store-brand items. In contrast, there is only one representative product priced under the bananas aggregate.

Table 2 in the appendix provides additional details on the CPI major components, including the basket weights, the number of elementary product classes and the total basket weight of the elementary aggregates that correspond to services.

New methodology for homeowners’ replacement cost weight

With this basket update, the methodology for calculating the weight of homeowners’ replacement cost in the CPI has been updated to ensure the most up-to-date and high quality expenditure weight possible. Previously the weight for homeowners’ replacement cost was calculated using the homeowners’ appraisal value (housing structure plus land) from the SHS, then multiplying the New Housing Price Index (NHPI) ratio of housing structure to property and a depreciation rate of 1.5%. The new method relies on the geometric depreciation estimates of total residential stocks from System of National Accounts (SNA), multiplied by the ratio of housing stock in units occupied by the usual owner resident to the total housing stocks, using depreciation rates of 2% for new construction and 4% for renovations.

The new method has some advantages over the previous method. For the previous method, the NHPI housing structure-to-land ratio was derived from estimates of new home construction mostly occurring in suburban areas, where land is typically cheaper. For the new method, depreciation estimates of residential stocks from the SNA offer additional accuracy and the data availability aligns with annual basket updates. This also ensures harmonization of depreciation rates with the SNA, using the national measure of depreciation.

Analysis of basket weights

Considerations

Expenditure share is a relative measure. Basket weight changes are a function of the expenditure growth within a given category, as well as the growth rate of all other expenditures in scope of the CPI. The basket share for a given good or service may either increase, decrease or remain unchanged from one period to the next, corresponding with the change in its proportion of overall expenditures. A basket share that is declining, for instance, might reflect a rate of growth in expenditures in that category which was less than the rate of growth of overall expenditures. For example, although consumer spending on health and personal care increased in 2024, the basket share for health and personal care decreased because spending in this category rose less than overall consumer spending.

Given that basket shares are rounded and published at the second decimal place, minor changes in expenditure share may not be apparent. Basket share changes of smaller magnitudes are accounted for in the CPI, as full precision^Note expenditure weights are used in its calculation.

Statistics Canada publishes two sets of basket weights for the CPI: weights at basket reference period prices and weights at basket link month prices. Weights at basket reference period prices are calculated for each reference period separately based on expenditure shares. Weights at basket link month prices are obtained by price-updating^Note the weights at basket reference period prices to obtain the hybrid expenditures expressed at prices of the link month.^Note The following analysis focuses on weights at basket reference period prices, as this best reflects the actual change in expenditure shares between basket reference periods.

Analysis of basket weights

Data table for Chart 1

Data table for Chart 1
Table summary
The information is grouped by CPI major component (appearing as row headers), 2020, 2021, 2022, 2023 and 2024, calculated using percentage share of CPI basket units of measure (appearing as column headers).

CPI major component	2020	2021	2022	2023	2024
	percentage share of CPI basket
Note: Weights are expressed as proportions of total household consumption expenditures in scope of the CPI in the weight reference period dollars. Source: Statistics Canada, Table 18-10-0007-01 - Basket Weights of the Consumer Price Index.
Food	16.44	15.75	16.13	16.72	16.72
Shelter	29.78	29.67	28.22	28.57	29.12
Household operations, furnishings and equipment	15.21	14.84	14.57	13.46	13.28
Clothing and footwear	4.08	4.52	4.77	4.70	4.40
Transportation	15.34	16.16	16.94	16.78	17.29
Health and personal care	4.76	4.74	4.92	5.18	5.06
Recreation, education and reading	9.53	9.52	9.98	10.42	10.16
Alcoholic beverages, tobacco products and recreational cannabis	4.86	4.79	4.47	4.17	3.98

While expenditures increased in seven major components, resulting basket shares only rose in two major components. Expenditures decreased in the clothing and footwear component. Changes in basket shares from 2023 to 2024 were relatively smaller than previous years, as 2023 was the first basket update reference period without COVID-19 pandemic restrictions in place.

The basket share for shelter increased from 28.57% in 2023 to 29.12% in 2024 while the weight for transportation rose from 16.78% in 2023 to 17.29% in 2024.

The weight for the clothing and footwear component decreased from 4.70% in 2023 to 4.40% in 2024 while the component for recreation, education and reading fell from 10.42% in 2023 to 10.16% in 2024. The components for alcoholic beverages, tobacco products and cannabis (3.98%), household operations, furnishings and equipment (13.28%) and health and personal care (5.06%) all saw declines in basket share by less than 20 basis points.^Note This was the fourth consecutive decline in basket share for both alcoholic beverages, tobacco products and cannabis and household operations, furnishings and equipment.

Despite increasing expenditures, the basket share for food (16.72%) remained unchanged compared with 2023, although the weight of this component increased in the previous two years. The relative importance of food purchased in stores fell slightly to 10.75% in 2024 compared with 10.82% in 2023. Basket shares for bakery products (1.01%) and fresh fruit (0.89%) rose slightly in 2024, while weights for meat (1.83%) and non-alcoholic beverages (0.54%) declined slightly. While price levels remained elevated, there was less upward price pressure on food expenditures in 2024 compared with 2023,^Note the result of improving supply chain conditions and fewer effects of extreme weather conditions in producer regions, among other factors. The basket weight for food purchased from restaurants rose slightly to 5.97% in 2024, coinciding with increased spending on dining out.^Note

The basket weight for the shelter component rose by the largest amount since the onset of the pandemic, and remains well above its pre-pandemic basket share. The increase in basket weight was largely driven by mortgage interest cost (5.65%) and rent (7.19%), with a 45 and 33 basis point increase respectively. While there were a series of policy rate cuts from the Bank of Canada^Note throughout the year, mortgage rates remained elevated^Note for much of 2024 as more consumers initiated new mortgages or renewed existing mortgages at higher rates compared with five years earlier. The mortgage interest cost and rent indexes posted historically large price increases on an annual average basis.^Note Moderating the increase in the shelter weight were other owned accommodation expenses (2.30%) and homeowners’ replacement cost (4.64%).

The transportation component took on more importance in the CPI basket, due entirely to the purchase of passenger vehicles index, the weight for which rose 80 basis points to 6.23% in 2024. This coincided with increased automobile sales^Note , amid improved vehicle availability compared with 2023, among other factors. Both the indexes for purchase of new passenger vehicles (3.88%) and purchase of used passenger vehicles (2.35%) increased in basket weight. Despite its increase, the basket share for the transportation component in the CPI remains below its pre-pandemic level. Declines in the weights for passenger vehicle insurance premiums (2.03%) and gasoline (3.71%) moderated the increase in the transportation component.

Consumers directed a smaller share of spending towards clothing and footwear, with a basket weight of 4.40% in 2024 following a weight of 4.70% in 2023. Clothing and footwear was the only component which saw expenditures fall in 2024, which was due to lower prices^Note , as price-adjusted^Note expenditures on clothing and footwear rose in 2024.

The basket share for recreation, education and reading fell from 10.42% in 2023 to 10.16% in 2024. Basket weight decreases were fairly broad-based within this component with the largest being in fuel, parts and accessories for recreational vehicles (0.30%), video equipment (0.27%) and purchase of recreational vehicles and outboard motors (0.96%).

Alcoholic beverages, tobacco products and recreational cannabis made up a smaller share of the 2024 CPI basket, continuing to trend downward in basket share since the beginning of the pandemic and declining from 4.17% in 2023 to 3.98% in 2024. Most of the decline came from alcoholic beverages purchased from stores (1.80%), amid declining sales volumes.^Note

In 2024, household operations, furnishings and equipment made up 13.28% of total expenditures, down from 13.46% in 2023. The lower basket weight was a result of lower prices, with the largest contributor being cellular services (1.30%), amid lower prices for cellular phone plans in 2024. Lower basket weights in household operations, furnishings and equipment were moderated by the increased importance of internet access services which rose from 0.99% of the 2023 basket to 1.33% in 2024.

Expenditure shares for the health and personal care component fell slightly from 5.18% in 2023 to 5.06% in 2024. The smaller basket share was largely related to personal care supplies and equipment (1.69%) which includes menstrual products, personal soap and oral-hygiene products.

Conclusion

Statistics Canada continues to update and enhance the CPI to ensure it remains the highest quality measure of price change. The 2025 basket update using 2024 expenditures incorporates weight and classification changes based on the most current and relevant expenditure data, ensuring the CPI remains as representative as possible of the price changes experienced by Canadians.

Statistics Canada continues to prioritize data accuracy, quality and timeliness. Working with price experts, other national statistical organizations and partners ensures that the data and methods used in the calculation of the CPI are aligned with international standards and best practices. The agency will continue to explore new potential sources of expenditure information for future basket updates and to adopt the most appropriate methods to keep the CPI relevant for Canadians.

Appendix