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Friday, February 20, 2004 Consumer Price IndexJanuary 2004In January, consumers paid 1.2% more for the goods and services included in the CPI basket than they did in January 2003. This was the smallest 12-month increase since May 2002, when it was 1.0%. January's 12-month increase is a substantial drop from the 2.0% in December, but closer to the 1.6% in November. However, excluding energy, the drop in the 12-month increase in the CPI was much less significant, falling from 1.7% in December to 1.5% in January. Energy prices were therefore primarily responsible for the large fall in the 12-month increase in the CPI from 2.0% to 1.2%. The CPI surged 0.8% from December 2002 to January 2003, mainly because of the return to normal levels for Ontario's electricity index in January 2003 after a refund was paid to customers in December 2002, and of higher gasoline and natural gas prices.
This monthly surge last year was not matched by an equivalent monthly increase this year, thus reducing the 12-month gap between January indexes compared with December indexes (base effect). The CPI rose only 0.1% on a monthly basis. Over the last six months, monthly increases have averaged 0.1%. The all-items index excluding the eight most volatile components, as defined by the Bank of Canada, rose 1.5% from January 2003 to January 2004. This is a considerable fall from December's 2.2% increase but closer to the 1.8% of November. These variations were caused mainly by the refund paid to Ontario electricity customers in December 2002 (base effect). Contributing factors to the 12-month increaseSignificant factors contributing to the 1.2% increase in the CPI included tuition fees, automotive vehicle insurance premiums, homeowners' replacement cost, cigarettes and homeowners' insurance premiums. Lower prices for gasoline, traveller accommodation, automotive vehicles, along with lower prices for some fresh fruit and vegetables exerted downward pressure on the 12-month increase in the CPI. Tuition fees, which were collected in September 2003, increased an average of 8.1%. Increases over the previous three years averaged 3.8%. Automotive vehicle insurance premiums increased on average 4.8% from January 2003 to January 2004, while premiums for homeowners' insurance were up 11.8%. Homeowners' replacement cost, a measure of the depreciation of a house estimated by the changes in the price of new housing (excluding land), was up 6.1%. Cigarette prices were 10.3% higher than in January 2003. This increase was primarily due to higher provincial tobacco taxes introduced throughout the year in most provinces. Gasoline prices were 2.5% lower than in January 2003. Traveller accommodation prices fell 10.7% from January 2003. They have been trending down since mid-2001. In fact, price levels are now similar to those of early 1994. The tourism industry has been affected by a number of factors over the last year, including the economic slowdown in the United States, a higher Canadian dollar, the world's instability and the outbreak of severe acute respiratory syndrome (SARS). Although automotive vehicle prices have increased 3.6% from the seven-year low reached in October 2003, they remained 0.8% lower than January 2003 levels. Some manufacturers have recently reduced incentives and raised prices on certain models. Lower prices for some fresh fruit and vegetables also put some downward pressure on the index. Overall fresh fruit and vegetable prices declined 6.1% from January 2003 levels. CPI inched up in JanuaryFrom December to January, the CPI inched up for a third consecutive month, increasing 0.1%. Higher prices for gasoline, non-alcoholic beverages and fuel oil exerted upward pressure on the all-items CPI. Downward pressure came from price decreases for natural gas, travel tours, air transportation, fresh fruit, sporting and athletic equipment and men's clothing. Gasoline prices rose on average 5.7%. Price increases were widespread across provinces and ranged from 1.9% in British Columbia and Newfoundland and Labrador to 7.8% in Alberta. Prices in Prince Edward Island, however, remained stable. Prices for non-alcoholic beverages rose 5.9% from December to January. Increases were seen in all provinces, as prices returned to normal after holiday season promotions. Fuel oil prices increased 10.0% in January. This follows increases of 2.3% in November and 3.3% in December. However, prices are still lower than January 2003 by 2.4%. Price hikes were due to stronger demand as a result of cold temperatures and higher crude oil prices. Price increases were noted in all provinces, with the strongest in Quebec (+14.4%) and Ontario (+13.7%). After increasing in November and December, the natural gas price index decreased 9.3% in January, mostly under the pressure of price declines in Ontario. In Ontario, utility companies have adjusted rates to reflect lower forecasted prices for the coming year and decreased the amount of a surcharge collected to recover the cost of gas purchased and stored in the spring when prices were higher. In January 2004, the travel tours index fell 11.0%. This is a slightly larger decrease than what was observed for January in the previous four years. January decreases averaged 9.8% over those four years. Travel tour prices are collected every year in January, February and March when they are most popular among Canadians. Of these three months, January is the month with the lowest demand. Since January prices are directly compared with those in March of the previous year, the index usually falls in January. Travel tour prices were down 2.5% from last January's levels. Air transportation prices fell 4.8% from December to January. Price decreases are usual in January, as the January fares are compared with high season fares in December. The seasonally adjusted CPI increased slightly from December to JanuaryAfter seasonal adjustment, the CPI rose 0.1% from December to January. Higher seasonally adjusted indexes for transportation (+1.0%), alcoholic beverages and tobacco products (+0.6%), clothing and footwear (+0.2%), and health and personal care (+0.2%) contributed to the increase. The indexes for food (-0.3%), shelter (-0.2%), and recreation, education and reading (-0.3%) exerted some downward pressure. The seasonally adjusted index for household operations and furnishings remained stable. All-items excluding the eight most volatile componentsThe all-items index excluding the eight most volatile components, as defined by the Bank of Canada, rose 1.5% from January 2003 to January 2004. This is a considerable slowdown from December's 2.2% increase but closer to the 1.8% of November. These variations in the 12-month percentage change were caused mainly by a base effect. A refund paid to Ontario's electricity customers, following provincial government legislation, lowered the electricity index in December 2002 to an unusually low level. December's 12-month change was bigger because the December 2003 index was compared with a temporarily low index in December 2002. Factors that contributed significantly to the rise in the all-items index also contributed significantly to the 1.5% rise in this index. Most of the difference between the two rates of increase was the result of the exclusion of the effect of increasing cigarette prices and decreasing prices for gasoline, and for fresh fruit and vegetables. From December to January, the all-items index excluding the eight most volatile components, as defined by the Bank of Canada, remained unchanged. The main factor explaining the difference between the 0.1% increase in the CPI and the fact that this index remained unchanged from last month, is the exclusion of the upward pressure from higher gasoline and fuel oil prices and the effect of lower natural gas prices. EnergyEnergy prices were down 1.1% from January 2003 to January 2004. This follows a 6.7% increase the previous month. Lower gasoline prices (-2.5%) combined with weaker fuel oil prices (-2.4%) accounted for the decrease. Higher natural gas (+1.7%) and electricity prices (+0.1%) partially offset these downward pressures. From December to January, energy prices increased 2.0% mostly as a result of price increases for gasoline (+5.7%) and fuel oil (+10.0%). Natural gas prices decreased (-9.3%), while electricity prices remained stable. Available on CANSIM: tables 326-0001, 326-0002, 326-0009, 326-0012 and 326-0016 to 326-0018. Definitions, data sources and methods: survey number 2301. More information about the concepts and use of the CPI is available online in "Your guide to the consumer price index" (/pub/62-557-x/4060137-eng.htm). Available at 7 a.m. on our website. From the home page, choose Today's news releases from The Daily, then Latest Consumer Price Index. The January 2004 issue of the Consumer Price Index (62-001-XIB, $9/$83; 62-001-XPB, $12/$111) is now available. The February 2004 Consumer Price Index will be released on March 18, 2004. For more information, or to enquire about the concepts, methods or data quality of this release, call Rebecca McDougall (1-866-230-2248; 613-951-9606; fax: 613-951-1539) or Ron Morency (613-951-3103), Prices Division.
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