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Consumer Price Index (CPI): How Does It Affect Me?





The Consumer Price Index (CPI) is an important measure to the Canadian economy. Whether it’s a price increase at your local grocery store, a rise in salary or a pension cost of living adjustment, the CPI affects millions of Canadians every day.

Most people use the terms CPI and inflation interchangeably – although both measure price changes over time, they are both different metrics. Let’s define the CPI, look at the difference between the CPI and inflation, and how it affects average Canadians.

Definition of the CPI

The Bank of Canada defines the CPI as “a measure that tracks movements over time in the level of consumer prices.” Simply put, the CPI measures the cost of living for the average Canadian. Statistics Canada tracks on a monthly-basis retail prices of around 600 goods and services an average Canadian family purchases. The goods and services measured include necessities like food, housing, transportation, furniture, clothing, and recreation.

Each month like clockwork Statistics Canada releases its Consumer Price Index Report. The report reads something like this “Consumer prices rose 1.2% in the 12 months to October, matching the increases in August and September.” Similar to housing statistics, the CPI is seasonally-adjusted. The CPI is reported on a nationally, provincially and municipal level.

You probably spend a lot more on food and shelter than haircuts and DVDs (hopefully!). To account for this, each item is given a different weighting base on the portion of disposal income it uses. Items like food and shelter have a higher weight – a price increase from these items will have a bigger impact on a family’s budget.

Calculating the CPI

Although the media typically only mentions increases in the CPI, it’s important to understand how the CPI is calculated. Current month prices are compared to a base year (currently 2002). The basket of goods and services for the base year is assigned a value of 100. Current prices are compared to the base year. For example in 2011 the average CPI was 119.9, meaning you’d have to pay $119.90 in 2011 for the same basket of goods and services that would have cost only $100 in 2002.

Core CPI

The Core CPI is a key measure used by the Bank of Canada to set monetary policy. Although the Core CPI is measured in the same way as the CPI, it excludes eight of the most price-sensitive items – fruit, vegetables, gasoline, fuel oil, natural gas, mortgage interest, intercity transportation, and tobacco products. This enables the Bank of Canada to obtain a clearer picture of the underlying trend of inflation.

The Bank of Canada has adopted and has maintained an inflation-control target in recent years. The target aims to keep the CPI at 2 per cent, in a band of 1 to 3 per cent. The Bank of Canada may consider raising its policy interest rate if the CPI goes above or below this target.

CPI vs. Inflation

Although similar, these two terms are not to be confused. While CPI and inflation both measure the rise over time in the cost of living and can reduce purchasing power, inflation is a broader measure since it includes all goods and services and doesn’t assign individual weightings to goods and services like the CPI.

Economists believe there are two main causes of inflation: demand-pull and cost-push. Demand-pull inflation is the classic example of demand and supply – if demand exceeds supply prices will increase. Cost-push inflation involves companies passing on cost increases (wage increases, higher taxation, increased input costs, etc.) to consumers in the form of price increases.

How does the CPI Affect Me?

Now it’s time to answer the million dollar question (pun intended). Besides price increases at your local grocer, the CPI is felt in many ways. Government benefits such CPP, GIS and OAS increase based on the CPI. CPP benefits are revised annually while the OAS is revised quarterly based on the current CPI. Although the CPI doesn’t include investments like stocks and bonds, the CPI can have an adverse impact on investment returns. You’ll have to achieve a long-term rate of return greater than the CPI to maintain your purchasing power. The CPI is used by employers to determine annual salaries increases for employees.

Many public sector pensions and a decreasing number of private sector pensions include inflation protection. Often referred to as a Cost of Living Adjustment (COLA), pension increases are typically based on the CPI. It’s a good idea to read the fine print in your pension plan booklet, as not all COLAs are equal. It’s important to know how often the COLAs take place (quarterly, yearly or ad-hoc), as well as what percentage of the CPI your pension will be increased by. For example, you may only receive 0.75% of the CPI increase – if the CPI increases 2% you’ll only receive a 1.5% pension increase. Also, some pensions only provide COLAs if the CPI increases above a set per cent, like 2%.

Do you monitor the CPI? How does the CPI affect your lifestyle?

About the AuthorSean Cooper is a single, 20-something year old, first time home buyer located in Toronto. He has experience in the financial sector as a Pension Analyst, RESP administrator and Income Tax Preparer. He holds a Bachelor of Commerce in business management from Ryerson University. You can read some of his other articles here.





37 Comments, Comment or Ping

  1. 1. SST

    The delusional Core CPI is “considered to reflect better the underlying trend of inflation”. Government reported numbers are a joke for this very reason: “…excludes eight of the most price-sensitive items – fruit, vegetables, gasoline, fuel oil, natural gas, mortgage interest, intercity transportation, and tobacco products — as well as the effect of changes in indirect taxes on the remaining components.” You know, stuff people pay for every single day.

    Eg. During the $150 oil speculation a lot of transporters (airlines, trucking et al) starting charging a ‘Fuel Surcharge’ (eg. tax) on their billings. Oil and fuel now cost less, yet the tax remains. The CPI counts a decrease on the base item yet ignores the continued cost of the tax.

    Not only that, but there is no ‘debt servicing’ component beyond mortgage interest (ie. consumer debt). How can this be if StatsCan/BoC claim “no effort is made to isolate “luxuries” or “necessities”, and none are omitted on moral grounds”? Perhaps to them record levels of consumer debt — purchases — don’t “represent a legitimate and relatively significant expenditure for many Canadians”.

    As well, the ‘Shelter – Owned’ component carries a ~17% weighting?
    Guess the “officials” haven’t read all the reports stating Canadians spend an average of 40+% on housing (90% in Vancouver, 50% in Toronto, etc).

    A much better gauge would be something much more simple:
    During the last decade, the top politico boys on Parliament Hill gave themselves an average 10% pay raise per year, for ten straight years.

    Easier to assume a 10% inflation floor, because you are paying for it (see above), than to get hoodwinked by unreal “official” numbers.

  2. @SST I can’t agree with you more. I was surprised to hear the Bank of Canada relies on the Core CPI when it comes to monetary policy. I think the CPI needs to be updated to better reflect the world we live in.

  3. 3. SST

    The CPI, core or otherwise, also wholly ignores the effects of events such as government and corporate failures and screw-ups.

    Ask the people of Montreal and Quebec how the cost of the 1976 Olympics effected their CPI over the 30-year time frame. Ask the citizens of Vancouver and B.C. how their CPI looks after their Olympics.

    Speaking of the people of the West Coast, their CPI is now jacked up an extra $2+ billion due to the legal-fraud of the now-ex BC Hydro executives who oh-so conveniently pushed the corporate losses forward year after year in order to show “profits” and collect their bonuses.

    Does the CPI take into account any such non-natural/market-born inflation?
    Not according to any of their literature.

  4. 4. Greg

    I’m not so convinced by anecdotes and conspiracy theories about the CPI. I’ve tracked my spending over the long term and found that CPI is a reasonable estimate for my consumption patterns.

  5. 5. SST

    Conspiracy theory?
    Anecdote?

    ALL FACTS, Greg. Unless you can prove otherwise. Thanks.

    Here’s another imagined anecdote of the shortcomings of the CPI: when they track food expenditures, they record the price only. Now, I’m sure we’ve all heard about the FACTUAL practice by food manufacturers dubbed “The incredible Shrinking [Insert Food Item Here]“. So 5 years ago when you bought a box of Whatever for $4, and today you pay $4.50, the government records a 12.5% increase in price. What they fail to record is that the box of Whatever is now 15% smaller. True cost is now 27.5%, more than doubling the “official” CPI for that item.

    You are paying more AND getting less.

    Quality of product is also not taken into account.
    Fifteen years ago did you use to be able to buy better quality clothing? Are you now having to buy cheap clothing at Wal-Mart, replacing it more often?

    We also get less service for our money. Twenty years ago a guy use to come out and pump your gas and wash your windows and check your oil for you. Now YOU have to do all that.

    I’m sure there are a plethora of these conspiratorial anecdotes for you to look into, Greg.
    Considering price only does not give a true picture of anything.

    Does StatCan make available DETAILED documentation of their recording practices? Would love a link.

  6. 6. Al

    SST is bang on right here; there is no way on gods green earth the cost of living is going up by only 2% a year.

  7. 7. Ben

    @SST

    Great points. I am now interested to read more and be critical about the current reported inflation rates. A think a lot of reported statistics suffer from a self serving bias. When you spend the time to analyse the input data you can be more critical about the interpretation of the output. It seems the media reports focus on the polished output figures, which causes misinterpretation of the facts or overstatements about the significance/validity of conclusions.

    Interesting topic. Be interested to hear an ecomnomists take on what should be included in the calculation, or why something would be left out.

  8. 8. Greg

    Looks like I’m taking the “Ed Rempel” role this time :).

    @SST, speaking of facts, your 10% for 10 years claim implies federal MPs were making $60,000/year in 2002 when they were making $130,000+. Some of your other claims look a little off as well. But I’m not going to spend a lot of time looking into these claims just because a blustery condescending blog commenter tells me to (sorry, couldn’t resist, unlike the faultlessly nice Ed Rempel).

    Sure some of the things you say may be facts, but that doesn’t make them not anecdotes. Conclusions from anecdotes usually aren’t sound and I don’t think the conclusion is sound in this case.

    The CPI is defined by the professional statisticians at StatsCan and try as our Harper government might to meddle, StatsCan does a pretty good job of remaining principled. Remember that the head of StatsCan even resigned rather than tow the line government line that a voluntary long form census as valid as a mandatory one.

    Sure the CPI isn’t perfect, but it can’t just be changed quickly for short term trends like the current housing bubble. The CPI has to evolve slowing over time so it can be used for long term comparisions.

    Psychologists point out that like gains and losses in investing, people feel the pain of price increases more than they feel the pleasure of price decreases or better value for the money. Prices go up and down all the time and the price of many things have been decreasing over the long term. Take cars for example, many more horsepower and km of life per dollar than in the past. The cost of electronics is dropping exponentially.

    As I said, the proof for me is in tracking my spending over many years. On the balance, the CPI has been a reasonable gauge of the cost of living increase for me over the long term. And that is what it is meant to measure.

  9. 9. Ben

    This was a great article with some really interesting discussions. It’s really good to see the comment section with relevent discussion to the article.

  10. 10. Al

    @ Greg

    I guess I’ll take the SST role then.

    ‘CPI has been a reasonable gauge of the cost of living increase for me over the long term. And that is what it is meant to measure’

    I guess you don’t pay taxes, and the land under your home or apartment was free, you eat GMO/pesticide laden food from walmart or loblaws which doesn’t increase in price as much as other food but is of inferior quality; you mention cars, but within the transport bucket how did someone from stats canada go back in time and stick an air conditioner in the car that you bought in 1972 and ajust things so that it looks like you paid for it – that is how CPI is calculated.

    [From Orwell's 1984]… never stated or implied that an act of forgery was to be committed: always the reference was to slips, errors, misprints, or misquotations which it was necessary to put right in the interests of accuracy

    [From the real world]… The 1996 Boskin Commission decided the US Consumer Price Index (CPI) overstated inflation by 1.1 percentage points a year mostly because it didn’t adequately account for the impacts of people shopping around for better deals. The changes to the US CPI implemented since then saved the US government hundreds of billions a year through lower social security payments and higher tax revenues. Canada is undergoing a similar exercise…

  11. 11. SST

    Oh, hope that wasn’t a “blustery condescending” personal attack, Greg — those aren’t allowed here.
    I’ll try to locate the Parliament HIll figures just to reassure you of the overpayment of those hard-working government types.

    Good for you for providing your own proof to yourself with your own data.

    Also interesting to note that StatsCan includes mortgages as a “good and service”. Good for them to consider a house to be a consumable item rather than an investment. But if you are going to record debt payments, then why is no weighting given to consumer debt (ie. credit card interest)? Seems fairly incomplete.

    As for the OP, the only way the bang-on CPI affects me will be years down the road when collecting government cheques. Otherwise ignored.

  12. 12. Greg

    @Al I don’t understand some of your comment.

    The CPI doesn’t measure personal income taxes, but I guess you are suggesting that tax increases are increasing the cost of living? Personal income taxes are not as high as they once were in Canada, and the GST has been reduced in recent years. Property taxes are up in my area around 1% more the CPI over the long term. I think that is due to Harris downloading and lowering provincial income taxes in the past. If the CPI understates inflation then tax brackets will move up more slowly and income tax increases will also lag inflation.

    I’m not so convinced that our food today is unhealthy. People are still living longer healthier lives. Too much crap food may put an end to that trend. But pop, chips, and processed food have always been unhealthy and the are cheaper than ever now.

    Not sure what to make of the 1972 car part. If most cars have air conditioners now and didn’t in the past, this seems to be an example of more value for the money.

    Interesting big brother quote. I guess you really do believe there is a government conspiracy to understate inflation and somehow screw us. I don’t see what the motivation for this would be, both revenue and expenditures would be reduced by this.

  13. 13. Greg

    @SST Sorry I won’t poke any more fun at your writing style. But I might not be the only one who finds it abrasive.

    It’s pretty easy to find out that the current MP salary is $157,731, not nearly enough for me to want to do that job :). Google “mp salary canada history” for a CBC page on MP salary history. According to that, after they eliminated the tax free allowance in 2001, the MP salary was $131,400. An average 10% increase for 10 years in a row is an increase by a factor of (1 + 10%)^10 = 2.6 times. Not unheard of for somebody in a growing career, but you’d have to go from vanilla MP to Prime Minister to make that kind of salary progress in government.

    When you said “Easier to assume a 10% inflation floor, because you are paying for it (see above), than to get hoodwinked by unreal “official” numbers.” did you really mean inflation is really 10% rather than what the the 2% or so indicated by the CPI?

  14. 14. SST

    @Greg: not to worry, I don’t take offense to personal opinions.
    Glad to provide abrasive facts any time.

    My fault for not being specific enough re: “top politico boys on Parliament Hill” comment. The pay raises were not MP/politician-centric, there were other high-ups not in the public eye who enjoyed double-digit salary gains.
    Still searching for the article although no promises, it’s already a few years old and things disappear quickly on the ol’ interwebs.

    Do I really think “inflation is really 10% rather than what the the 2% or so indicated by the CPI?” Yes.

    When top people in the government address themselves 10% annual raises for a decade…when my power rates are hiked 8% per year (thanks ex-exec cons!)…when my water rates are jacked up 9% per year because I do too good of a job conserving water…when the cost to fill my tank increases 8% per year…about the only necessities NOT rising at the laughable ~2% CPI are certain food stuffs and natural gas.
    (Even the cost of paying minimum wage employees is increasing 3.5% per year!)

    To top it off with even more ridiculousness, StatsCan admits they over-estimate CPI by up to 0.6%. Thus, according to the government, the “true” cost of living is even less expensive than official reports. Hopefully they are taking at least one (very slow) step into reality with the intention to measure prices year-over-year.

    But this is not good enough. As I’ve stated, how can StatsCan give weighting to “mortgage interest” payments — interest paid on a loan to purchase a good — yet completely ignore payments on credit card interest — that is, interest paid on a loan to purchase a good/service? Also completely ignored in the CPI is the interest paid on the $15-$20 billion of student loans, ie. interest paid on a loan to purchase a good/serive.

    You would think with Canadian consumer credit debt and student debt hitting all-time highs, yet again, the CPI would consider these genuine costs of living. Apparently they are not.

    Not even sure why a financial instrument — debt — is counted in CPI (and that being of a single and specific type of debt). Do they consider debt to be a good or service? Why not include all financial assets — stocks, bonds, real estate, commodities? Very odd.

    As a final boot, why no inclusion of things such as CPP rule changes? I pay for this eventual good/service every single year and now see an immediate 6% reduction in benefits (ie. increase in cost of living) if I choose to collect at age of 60. Or I can work an extra year (increasing my cost of living) to collect a pre-2012 level of CPP. I’m sure more benefit reductions/cost increases will occur by the time I retire, but according to StatsCan, these are irrelevant.

    The CPI is an incredibly weak indicator of the true cost of living due to its many shortcomings.

  15. 15. Greg

    @SST Sure we need to keep an eye on the government and big crown corporations as there is no shortage of shenanigans and overpaid people doing what looks like a pretty poor job. But I’d be surprised if there were very many people in government that got 10% raises for 10 years in a row with no promotions or increased responsibility.

    A 10% raise in a year isn’t really such a huge thing in a merit based organization for employees that improve their skills and value. A teacher in Ontario starts at $45k and can get to $94k in 10 years. That’s a 7.5% raise each year for 10 years of showing up and doing the job, plus taking some extra training. In such a seniority based system raises vary little, in a merit based system raises can vary much more.

    I think you are way off in thinking inflation is 8% higher than the CPI. Sure power went up a ton in 2000-2001 (in Ontario) when Ontario Hydro finally had to own up to their boondoggles. My power costs peaked in 2007 and have reduced substantially back to below the 2001 level since. Same house the whole time, same air conditioner, more efficient lights installed before 2007. The great recession did cause deflation of some prices and rates based on time of day helped me spend less on power without actually using less power.

    We’ll probably never see 60 cent a litre gas again but cars will be twice as efficient with no loss of capability, so it will be a wash. Gasoline hasn’t increased at all since 2010 and likely won’t for several years with all the new supply coming on stream.

    I don’t see the problem with using mortgage interest as part of the shelter component of CPI. Interest is what you pay for the service of being provided money now and that is they way many people pay for their shelter, the others pay rent. Interest rates are at all time lows so interest costs couldn’t possibly contributing to the CPI understating inflation. You have a point about housing prices and student loans (which reflect education costs), which are up. Housing costs are declining now though.

    So, some things up, some things down. On the whole about in line with CPI.

    Regarding CPP, of course there is a reduction if you retire and collect earlier. It’s like any savings plan, if you stop contributing and start taking money out until the end of your life, there won’t be as much to take out per year. It’s pooled across a large population and statistically averaged out, but it functions similar to personal retirement savings. Except CPP is subject to government boondoggles. Until about 2000 contribution rates were less that what was required. The CPP became so underfunded that it was finally fixed by jacking up contribution rates, which shifts value from younger (who have to pay the higher rates for longer) people to older people (who got to spend more time contributing less than needed). People born in the 1940s will get more than twice what they put in. People born in 1960 pretty much break even. People born in 1990 and later only get back 2/3 of the value they put in. And increasing the OAS start age from 65 to 67 is another $20,000 that people born in the mid 1960′s and later will have to ante up for their elders.

  16. 16. SST

    @Greg: “I don’t see the problem with using mortgage interest as part of the shelter component of CPI. Interest is what you pay for the service of being provided money now and that is they way many people pay for their shelter, the others pay rent. Interest rates are at all time lows so interest costs couldn’t possibly contributing to the CPI understating inflation.”

    Shelter is a necessity; “owning” a house is a luxury.

    What of all the people who use their credit cards to pay for food or any other non-discriminated luxury or necessity within the CPI?
    Why not measure those interest payments as well?

    It doesn’t matter the rate of interest, it’s the mere inclusion of measuring only one specific type of debt and ignoring all others which is the problem.

  17. 17. Greg

    @SST The CPI has a component for mortgage interest and a component for rental costs to account for the fact that some people rent and some people buy their shelter. Using long term credit card debt to buy necessities isn’t sustainable and isn’t an inherent part of consumer prices. People at the point of putting necessities on credit cards go bankrupt very quickly, don’t have to pay back all the debt/interest, and don’t qualify for credit again any time soon. There was less than 125,000 bankruptcies and proposals in the last year in Canada and the rate is going down, and a lot of them weren’t just buying necessities on credit. These are a relatively small number people who didn’t live within their means or suffered misfortune, not an inherent consideration for CPI and it wouldn’t make a huge difference even if was.

  18. 18. Al

    @Greg

    My point is twofold.

    1) By excluding income taxes and the land costs associated with housing, the CPI excludes the two largest components of most people’s spend and therfore the CPI is not a representative consumption basket.

    2) Parts of what the CPI calculate are through flawed methodology. My comment on food is that healthy good food used to be cheaper. If you buy an ear of sweet corn at the store today, odds are you will be getting genetically modified corn; that’s not as high quality as the conventionally grown corn that I was buying five years ago, but the price is cheaper and hence inflation is computed to be lower. Personally I have to switch to organic to avoid this stuff, and hence my personal inflation is higher as is the inflation rate of anyone else who does not want to eat inferior quality food. The 1972 car part is similar, because air conditioners are standard equipment today, stats canada adjusts the quality of the 1972 car to include an air conditioner and so adds the price of a non-existant air conditioner to the car purchased in 1972 thereby making the price base of 1972 higher than it was in actuality; therefore the increase between 2012 prices and 1972 prices is not as high as it should be and therefore inflation optically lower.

    It’s not a conspiracy that I believe in and I think within their remit stats canada is doing a very professional job. But CPI is conceptually flawed and those in power there is no incentive to change it. Government revenues are actually higher because of the phenomenon of fiscal drag; expenditures are lower because government indexed programs grow slower (OAS, CPP, etc.) furthermore with central bank inflation targetting, we all get lower interest rates than we otherwise should – nice for homeowners, great for the government which gets to pay lower rates on it’s own borrowing, but unbelievably great for the banking industry which is pretty influential.

    Lets talk about whether taxes are really going down another time because I would respectfully disagree with you there (perhaps FT can post on that?). I take your point on GST and PST, however it is my understanding that those are captured in the CPI.

  19. 19. SST

    This has nothing to do with bankruptcies.
    With all-time high consumer credit and student loan debt loads, obviously minimum payments (and new instances of debt) are climbing.

    A mortgage is simply a loan to buy a durable/consumable product.

    The owner-equivalent cost of rent is no more than the principle payment of the mortgage. Interest is the cost of buying debt.

    Thinking otherwise is unwise.

    (Perhaps the CPI people have some kind of convoluted formulae to extrapolate that fraction of rent which is applied to the landlord’s mortgage interest?)

    Why no interest component for buying debt to acquire other kinds of consumable and/or durable product (eg. education, snow-blower, shoes, etc.)?

    If one person decides to rent their shelter and another person decides to pay for their shelter by buying mortgage debt, how is that different than one person paying cash for a pizza vs. the person who buys credit card debt to pay for the pizza? Interest is owed on both debt. The ONLY difference is that, presumably, the pizza debt could be expunged before interest payments occur.

    As StatsCan puts it, they do not differentiate between ‘luxury’ and ‘necessity’. Shelter is a necessity; debt is a luxury. Why then measure only one form of luxury (mortgage debt) but ignore all others (every other type of loan debt)?

  20. 20. Greg

    @Al Regarding income taxes, in 2000 their were three federal tax brackets- 17%, 25% and 29%. In 2001 the lower two brackets were reduced to 16% and 22% respectively and the upper one was split into two- 26% and 29% (where it all previously was 29%). This meant big income tax reductions for all tax payers. In 2004, the bracket thresholds were increased 10%- way more than the usual CPI, again reducing taxes for all tax payers. As most provinces calculated tax owing as a percentage of federal tax, this also lowered provincial taxes. Alberta got fed up with this and decoupled their provincial tax rates from the federal rates. Since 2004 the lowest tax rate reduced to 15%, which is fairly significant for taxpayers in the lowest bracket and the GST was reduced to 5% in two steps. We also got all sorts of new tax breaks.

  21. 21. SST

    @Greg (#13): “When you said “Easier to assume a 10% inflation floor, because you are paying for it (see above), than to get hoodwinked by unreal “official” numbers.” did you really mean inflation is really 10% rather than what the the 2% or so indicated by the CPI?”

    I stopped trying to find the old article on the top dog raises. You can take my word on the validity, or not.

    However, the Universe has provided another very timely and topic article on the same matter:

    http://www.therecord.com/news/canada/article/852169–pbo-says-average-federal-employee-costs-taxpayers-114-100-a-year

    “The PBO says compensation in the federal service has outpaced inflation and that of other employees — both in business and other levels of government — over the last 13 years.

    Between 1999 and 2012, personnel costs per employee — or full-time equivalent using government terminology — rose by an average 5.1 per cent annually, more than twice the 2.1 per cent average annual inflation rate.”

    Why should it be so difficult to believe the “best and brightest” (LOL) received annual 10% raises during this time frame when the average faceless civil servant was taking home more than 5%?

    At the very minimum, the inflation rate is 5.1% — nearly 2.5 times greater than the absurd fantasy that is the CPI.

  22. 22. SST

    As I was saying:

    http://www.huffingtonpost.ca/2012/12/13/consumer-debt-canada-2012_n_2292914.html

    “The new report shows household debt to annual disposable income reached a new high at 164.6 per cent, from 163.3 per cent the previous quarter.

    Statistics Canada has recently revised how it calculates the measure to make it more representative of actual household finances.”

    StatsCan recognizes and pursues consumer debt as a very real factor in “household finances”, yet completely ignores it in its CPI calculations?

    And the reason for this is…?

  23. 23. SST

    Just to let you know the world didn’t end:
    http://www.cbc.ca/news/business/story/2012/12/21/business-inflation-november.html

    “Regionally, inflation was…lowest in British Columbia, at a barely visible 0.1 per cent.”

    Wow.
    And with the CPI over-shoot, that means I’m living in negative inflation land! Woo hoo!

    Wonder how that happens when my power and water bill are both pushing 10% increases? Oh right, those daily-usage things are ignored. Wonder what the physics are behind spending $1 more yet saving more than $1 at the same time?

    Would love to have any of those inflation-insulated Ottawanians come live in the real world for a year or ten.

  24. 24. SST

    The rise in deductions from your pay-cheque coming in 2013:
    http://www.cbc.ca/news/canada/story/2013/01/01/new-year-cpp-ei-payroll-tax-increases.html

    EI: +6%
    CPP: +2%
    Medical Services (B.C.): +4%

    Of course, taxes are all discretionary non-consumer items which do not affect the cost of living (CPI).

  25. 25. SST

    @SST #1: “During the last decade, the top politico boys on Parliament Hill gave themselves an average 10% pay raise per year, for ten straight years.”

    @Greg #15: “But I’d be surprised if there were very many people in government that got 10% raises for 10 years in a row with no promotions or increased responsibility.”

    Just by pure fat chance, I ran across the article:

    http://money.ca.msn.com/savings-debt/gallery/gallery.aspx?cp-documentid=23577097

    The average salary (and salary ONLY) increase of those articled was 9.6% per year for the period 2000-2010.
    Sorry, I was off 0.4%. Perhaps they made it up in their pension plans and/or “perks”.

    CPI for the same period is 1.97%.

    (The data set which you can peruse if you so choose:
    http://www.parl.gc.ca/ParlInfo/Lists/Salaries.aspx?Menu=HOC-Politic&Section=03d93c58-f843-49b3-9653-84275c23f3fb&Year= )

    As for raises with “no promotions or increased responsibility” theory…that’s what government (and unions) are all about!
    Speaker of the Senate enjoyed an average salary increase of over 17% per year — same position, same title, same responsibility.

    Working for the provincial government, for the past six years I’ve received an average annual raise of 8.5% for doing the EXACT same job — no promotion, no additional training/education, no increased responsibility.

    2000-2010: average federal politician raise = 9.6% per year
    1999-2012: average federal employee raise = 5.1% per year

    CPI (both ranges): 1.97% and 2.1% per year
    Raise in individual income (both ranges): 1.82% and 1.95% per year

    Hope these facts didn’t surprise you too much!

  26. 26. SST

    re: OP: “Core CPI…excludes eight of the most price-sensitive items – fruit, vegetables, gasoline, fuel oil, natural gas, mortgage interest, intercity transportation, and tobacco products. This enables the Bank of Canada to obtain a clearer picture of the underlying trend of inflation.”

    A clearer picture of inflation?

    According to StatsCan, household expenditures are as follow:

    Shelter 28%
    Transportation 21%
    Food 14%

    Government exclusions omit the effects of inflation on ~30% of expenditures.

    Yet another reason why CPI is meaningless.

  27. 27. SST

    @Greg (#13): “…did you really mean inflation is really 10% rather than what the the 2% or so indicated by the CPI?”

    Article about the correlation between CPI and gold:
    http://www.macro-investing-strategy.com/gold-and-inflation/

    Ignoring the obviously flawed CPI measurement in favour of gold levels, inflation over the last 40 years has risen an average 9.5% per annum.

    Average Canadian wage
    1970: $5,700
    2012: $30,000 (+4%/yr)

    Results in an average loss of purchasing power of 5.5% per year.

  28. 28. SST

    The more things change…

    Motel 6

    1962 a room cost $6.
    2013 a room cost $50 (minimum).

    Has the utility of a hotel room really increased 700+% in fifty years?

  29. 29. SST

    As previously stated, taxes are NOT included in the out-of-touch CPI calculations.

    Yet:
    http://www.timescolonist.com/property-taxes-up-4-for-victoria-homeowners-1.114087

    A 4% property tax increase when the official CPI is “a barely visible 0.1%”???

    Gotta love the disconnect between government tentacles.

    Are my roads 4% more paved and smooth? No.
    Am I using 4% more utilities? No.
    Did the police and fire forces increase 4%? No.
    Am I producing 4% more garbage? No.
    Has my house increased 4% in basic utility? No.
    Has my lot size increased 4%? No.

    The real reason — tax shift from business to individual.

  30. 30. SST

    On my most recent bill the price of residential water increased 8% and the sewer rate increased 16%.

    Lucky for me the CPI in British Columbia is almost 0%.

  31. 31. SST

    “Regionally, British Columbia and New Brunswick saw their inflation rate dip into negative territory.”
    http://www.cbc.ca/news/business/story/2013/05/17/business-inflation-cpi.html

    Uh-oh…deflation rears it’s ugly head! lol!

    Funny that “negative” inflation, considering my property tax, food, utilities, fuel, and wage have all increased. Perhaps I just need to buy more travel tours and video equipment.

    Good thing B.C. gas prices haven’t increased 10% over the last month. Guess the next CPI report will be a bit different. Or not.

  32. 32. SST

    Excellent!

    http://www.statcan.gc.ca/daily-quotidien/130621/longdesc-cg130621a004-eng.htm

    Current average deflation in BC is now -0.7%! Woo hoo!

    I wonder when I’ll be seeing a decrease of prices in wide range of products and services?

    Gas? No.
    Rent? No.
    Taxes? LOL!
    Food? No.
    Utilities? No.

    Hmmm….

  33. 33. SST

    Nice little +4.5% pop in West Coast gas prices this weekend.

    If this is CPI-defined “deflation”, I don’t want any part of inflation!

  34. 34. SST

    At the grocers on the weekend to find canned tuna now costs $2 per can; a year ago it was $1 — a 100% increase in cost.

    For those here in the upper-crust, canned tuna is well-known to be a low-income staple: cheap and high in protein.

    The new Fed tariff act is the cause of this increase, but the Retail Council of Canada states “changes in tariff rates of up to 4 per cent for items such as canned tuna”…so what is comprising the other 96% of the price increase?

    And the poor continue to get more poor.
    (But at least hockey equipment is exempt from new tariffs!)

    Wonder if the gov’t (or any entity) has ever taken up the task to formulate an economic-level CPI (eg. lower/middle/upper class) instead of the ignorant average with which we are currently saddled.

    [Note: Empire Co. (EMP.TO) recently bought the dominant local grocer chain. Since that time, prices have risen and quality has dropped...so the above could just be company-centric.]

  35. 35. Goldberg

    You’ve had the last 14 posts on an article that’s 8 months old. Who are you talking to? lol

  36. 36. SST

    Sorry you take offense to new information.
    For those readers who are just ignorant enough not to know, CPI gets updated every month (not every 8 months) and is a perpetual “article”.

    Have a great day!

  37. 37. Goldberg

    lol. But how many ways can you say that CPI does not reflect reality? We get it now. That’s why nobody is arguing with you and you’ve made the last 14 post, unanswered. lol. But can we expect another “CPI analysis” from you right here, next month, and the next? Let me guess, that rate won’t be high enough to reflect reality as well…

    All in good fun.

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