As I assumed the inflation numbers for the end of the year have gone completely squirrelyâ„¢ (my new term for numbers manipulated to create a false sense of security) thanks to plummeting gas prices. Given gas is almost 1/2 price compared to 2 years ago, which is nuts, but I just keep feeling this whole thing is a manipulation, but that remains to be seen.
Inflation was around 2.4% (year over year) just a short while ago, now it is at 1.5%, and there is a real chance of it dropping further, if gas prices continue to drop (although I note Diesel fuel prices are not dropping that fast, so the trucking industry or farmers are not basking in the joys of the current low gas prices).
How squirrely are these numbers?
The Consumer Price Index (CPI) rose 1.5% in the 12 months to December, following a 2.0% increase in November.
That is a 25% drop in one month for the year over year inflation numbers, pretty big, but what does it really mean?
You can see without the gasoline, inflation continues to run above 2.0%, which is worrying, isn’t it? I bet you are asking just how much did Gas drop these past 12 months?
On a monthly basis and before seasonal adjustment, the gasoline price index fell 9.8% in December. Between June and December 2014, gasoline prices decreased 24.6%. In comparison, prices for gasoline declined 42.7% between June and December 2008.
That is a bloody big drop. The graph shows how big a drop it was:
How does this all look in the big basket? This is the measure of the actual price over time.
Bank of Canada’s core index
Remember the Bank of Canada has their own way of measuring things, and they seem to not be taking gas into the equation (as much):
The Bank of Canada’s core index rose 2.2% in the 12 months to December, after increasing 2.1% in November.
Interesting that they lowered interest rates even with Inflation at 2.1%?
The Big Table
Let’s have a look at one of the big tables to see what has gone up in price
Consumer Price Index, major components and special aggregates, Canada – Not seasonally adjusted
| Relative import1 | December 2013 | November 2014 | December 2014 | Nov to Dec 2014 | Dec 2013 to Dec 2014 | |
| % | (2002=100) | % change | ||||
| All-items Consumer Price Index (CPI) | 100.002 | 122.7 | 125.4 | 124.5 | -0.7 | 1.5 |
| Food | 16.60 | 132.5 | 136.9 | 137.4 | 0.4 | 3.7 |
| Shelter | 26.26 | 129.9 | 132.8 | 133.0 | 0.2 | 2.4 |
| Household operations, furnishings and equipment | 12.66 | 114.7 | 118.2 | 117.8 | -0.3 | 2.7 |
| Clothing and footwear | 5.82 | 89.4 | 94.7 | 91.1 | -3.8 | 1.9 |
| Transportation | 19.98 | 128.5 | 127.7 | 124.9 | -2.2 | -2.8 |
| Health and personal care | 4.93 | 118.1 | 119.9 | 119.6 | -0.3 | 1.3 |
| Recreation, education and reading | 10.96 | 105.3 | 106.8 | 106.1 | -0.7 | 0.8 |
| Alcoholic beverages and tobacco products | 2.79 | 141.2 | 149.4 | 149.1 | -0.2 | 5.6 |
| Special aggregates | ||||||
| Core CPI3 | 84.91 | 121.0 | 124.1 | 123.7 | -0.3 | 2.2 |
| All-items CPI excluding energy | 91.44 | 119.9 | 122.9 | 122.5 | -0.3 | 2.2 |
| Energy4 | 8.56 | 158.9 | 156.5 | 148.7 | -5.0 | -6.4 |
| Gasoline | 4.62 | 179.7 | 166.2 | 149.9 | -9.8 | -16.6 |
| All-items CPI excluding food and energy | 74.85 | 117.1 | 119.8 | 119.3 | -0.4 | 1.9 |
| Goods | 48.18 | 113.8 | 116.2 | 114.6 | -1.4 | 0.7 |
| Services | 51.82 | 131.7 | 134.5 | 134.5 | 0.0 | 2.1 |
1.2011 CPI basket weights at January 2013 prices, Canada, effective February 2013.
2.Figures may not add up to 100% as a result of rounding.
3.The Bank of Canada’s core index excludes eight of the CPI’s most volatile components (fruit, fruit preparations and nuts; vegetables and vegetable preparations; mortgage interest cost; natural gas; fuel oil and other fuels; gasoline; inter-city transportation; and tobacco products and smokers’ supplies) as well as the effects of changes in indirect taxes on the remaining components. For additional information on the core CPI, consult the Bank of Canada’s website.
4.The special aggregate “energy” includes: electricity; natural gas; fuel oil and other fuels; gasoline; and fuel, parts and supplies for recreational vehicles.
Source(s):
Funny how when gas prices go down you get disappointed if prices go up a few cents. When I filled up yesterday I was actually upset that I was paying more than 90cents a liter. Then I remembered when gas was $1.29 and I shut my mouth
Yes, I actually cringed seeing 90 cents a litre this morning, after gasing up at 82 cents a litre yesterday night… wait a minute, wasn’t I paying $1.40 a litre 8 months ago? 😳
Diesel prices are usually higher in winter when refineries are cranking out heating oil.
http://www.producer.com/2014/09/canadian-diesel-prices-could-spike-again/
They might ease down in the spring but that’s a bit hard to call right now.
OK thanks for the info.