Inflation is Hot!
The title pretty much sums it all up, thanks to the price of Gasoline and such, inflation is now at 3.7% year over year for May, which is the largest jump in about 8 years, which is cause for concern. Yes, a large portion of the jump is due to gasoline prices, but not completely, and how will the Government react to this in terms of interest rates and policy? (according to our good friends at Stats Canada)
It is possible to argue that this is an aberration, and gas prices are already falling and that inflation may calm back down, and let’s hope that might actually be the case, however, the CPI climb has been fairly relentless since 2010, and speaking as a consumer lots of things are getting pretty darn expensive.
As you can see from the graphic Gas does take up a lot of the big jump in May (year over year).
As Stats Can points out:
Energy prices advanced 16.6% during the 12 months to May, following a 17.1% increase in April. Gasoline prices rose 29.5%, the largest increase since September 2005 when prices rose in the aftermath of Hurricane Katrina. The latest year-over-year increase follows a 26.4% gain in April, and leaves the gasoline index just below the peak level reached in July 2008. Prices were also higher for fuel oil (+28.2%) and electricity (+0.9%), while they declined 5.3% for natural gas.
Good to hear the Natural gas prices have dropped a little, but the gas and fuel oil price jumps are killing consumers and businesses right now as well.
How bad is Gas prices?
Given how low it has been, this rise is more than a little disconcerting.
Bank of Canada’s core index
The Bank of Canada’s core index advanced 1.8% in the 12 months to May, following a 1.6% gain in April. This is very interesting given the Bank uses their own barometer in terms of prices, and somehow energy and gas don’t have that big a weight in this, which is wild (IMHO).
Gas prices will drive up food prices, and have already done so, and now in Ottawa the Transit Commission and the Police are complaining they will be blowing their budgets for the year due to gas prices too. Hard to believe the Bank of Canada would not put a heavier weight on energy.
The Big Table
As my regular readers know, I love tables of numbers, and with the CPI Stats Canada has some amazing number sets to reflect how the data is derived.
| Relative import¹ | May 2010 | April 2011 | May 2011 | April to May 2011 | May 2010 to May 2011 | |
|---|---|---|---|---|---|---|
| Not seasonally adjusted | ||||||
| % | (2002=100) | % change | ||||
| All-items CPI | 100.00² | 116.3 | 119.8 | 120.6 | 0.7 | 3.7 |
| Food | 15.99 | 122.9 | 126.9 | 127.7 | 0.6 | 3.9 |
| Shelter | 27.49 | 123.0 | 125.2 | 125.2 | 0.0 | 1.8 |
| Household operations, furnishings and equipment | 11.55 | 108.6 | 109.8 | 110.4 | 0.5 | 1.7 |
| Clothing and footwear | 5.31 | 92.7 | 93.1 | 93.7 | 0.6 | 1.1 |
| Transportation | 20.60 | 118.1 | 127.2 | 128.9 | 1.3 | 9.1 |
| Health and personal care | 4.95 | 114.6 | 117.3 | 117.2 | -0.1 | 2.3 |
| Recreation, education and reading | 11.20 | 103.6 | 105.1 | 106.1 | 1.0 | 2.4 |
| Alcoholic beverages and tobacco products | 2.91 | 132.1 | 135.0 | 135.7 | 0.5 | 2.7 |
| Special aggregates | ||||||
| Core CPI³ | 82.15 | 115.7 | 117.2 | 117.8 | 0.5 | 1.8 |
| All-items CPI excluding energy | 89.92 | 114.6 | 116.7 | 117.3 | 0.5 | 2.4 |
| Energy | 10.08 | 137.4 | 159.2 | 160.2 | 0.6 | 16.6 |
| Gasoline | 5.80 | 147.1 | 186.8 | 190.5 | 2.0 | 29.5 |
| All-items CPI excluding food and energy | 73.93 | 112.8 | 114.4 | 115.0 | 0.5 | 2.0 |
| Goods | 47.80 | 109.4 | 113.7 | 114.4 | 0.6 | 4.6 |
| Services | 52.20 | 123.2 | 125.9 | 126.7 | 0.6 | 2.8 |
A Year Ago?
So a year ago inflation was moderating with gas prices coming back into line.
It’s crazy that oen particular commodity can affect the everything else. This demonstrates that we should all push to mvoe from consuming so much oil. As the BRIC countries modernize further, we will only compete more for these natural resources. Add to that speculators trying to cash in and everyone except investors lose.