Consumer Price Index

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Consumers paid 2.0% more in February for the goods and services included in the Consumer Price Index (CPI) basket than they did in February 2006. This represents a substantial acceleration over the previous month.

The jump in the 12-month change in the all-items CPI from 1.2% the previous month to 2.0% in February was the sharpest since September 2005. The all-items CPI then surged an equivalent 0.8 percentage points in a single month in the wake of Hurricane Katrina. In February, the acceleration was primarily due to higher gasoline prices in some regions of the country.

Compared to last year, higher costs paid by consumers for owned accommodation remained the main source behind the 2.0% rise posted in February. Lower prices for natural gas dampened the gains.

Excluding energy, the 12-month change in the all-items index for February was 2.2%, faster than the 1.8% change in the previous month. This was the largest increase since June 2003.

The Bank of Canada's core index climbed 2.4% in February following a 12-month rise of 2.1% in January. This index, which is used by the Bank to monitor the inflation-control target, has remained within the target range set by the Bank of Canada for several months. The core CPI has posted 12-month average increases of 2.1% since May 2006.

On a month-over-month basis, the all-items CPI rose 0.7% between January and February, after a slight 0.1% gain the previous month. This growth had not been seen since September 2005 (+0.9%). February's increase was due primarily to higher gasoline prices.

In Ontario, gasoline prices rose 9.8% between January and February this year. Production interruption in some Ontario and Quebec refineries led to the temporary closure of some gas stations in those provinces because of the reduced availability of stock.

The monthly all-items index excluding energy climbed 0.6% between January and February 2007, following a 0.2% increase the previous month. A comparable monthly increase in this index was observed in November 2004.

On a monthly basis, the core index posted a 0.5% increase, compared to 0.1% in January.

In January, Statistics Canada announced a major update of the CPI to reflect changes in the spending patterns of Canadian households. This update, which will occur on June 19, is designed to ensure the CPI's reliability as a measure of inflation, a statistical series deflator and a tool for indexing various payments and transfers. For more information, consult the article released in The Daily on January 23, 2007 titled: "Consumer Price Index: A preview of the upcoming basket update".

12-month change: Owned accommodation costs push up all-items index

Important factors contributing to the 2.0% change in the 12-month all-items index included mortgage interest cost, homeowner's replacement cost, food purchased from restaurants and gasoline. These components were slightly offset by a drop in the price of natural gas.

Mortgage interest cost, which measures the changes brought about by prices in the amount of mortgage interest owed by owners, rose 5.3% in February, up from the 12-month 5.1% change posted in January. February's increase was the fastest since February 2001 (+5.5%). This index continued its upward trend that started in December 2005, although at a slower pace.

Homeowner's replacement cost, which represents the worn-out structural portion of housing and is estimated using new housing prices (excluding land), grew 7.1% between February 2006 and February 2007, following a rise of 7.6% in January. Since November 2006, the 12-month change in this index slowed down, coinciding with slower growth in Alberta.

Upward pressure on consumer prices between February 2006 and February 2007 also resulted from higher prices for food purchased in restaurants and gasoline.

In contrast, a 19.3% plunge in natural gas prices had a moderating effect on the growth of the all-items CPI. This decline followed a drop of 21.5% posted in the previous month and a series of consecutive reductions recorded since July 2006.

Natural gas prices, which are set quarterly in the majority of provinces, remained relatively low in February compared to last year. Current prices still reflect above-normal stock levels resulting from the mild temperatures of early winter.

Continuing the trend noted over several months, other components such as vehicle purchases and leases and computer equipment and supplies also contributed to the decline in the all-items index between February 2006 and February 2007.

Above-average price increases in only three provinces

Provincially, prices on average were up in all 10 provinces, but they rose faster than the national average in only three provinces between February 2006 and February 2007: Alberta (+4.9%), British Columbia (+2.2%) and Manitoba (+2.1%). Averages for these provinces have been higher than the national all-items CPI since September 2006.

The smallest changes in the all-items index occurred in New Brunswick (+0.9%) and Prince Edward Island (+1.0%).

Costs related to owned accommodation again played a key role in consumer price growth in Alberta, while in Ontario consumer prices increased 1.6%, mainly the result of higher gasoline prices.

Alberta was the main driver behind higher homeowner's replacement cost.

Canadian consumers, except those living in Alberta, enjoyed lower natural gas prices between February 2006 and February 2007. Ontario, Manitoba, British Columbia and Quebec posted the most significant reductions over the same period.

Month-over-month: Gasoline, fresh vegetables contribute to price rises in February

Higher prices for gasoline, fresh vegetables and travel tours pushed the all items CPI upward in February, although the rise was moderated somewhat by lower natural gas prices.

Gasoline shortages, resulting from the fire at the Ontario refinery, mainly contributed to the 3.8% national increase at the pump between January and February this year. Pump prices climbed 9.8% in Ontario, while drivers in Quebec paid 1.7% more.

In addition, gasoline prices rose 2.1% in Alberta. A strike created delivery problems, causing a drop in available stock which translated into higher prices in February. Consumers in the three other Western provinces and in the Atlantic Provinces were not directly affected by these factors and paid less for their gas in February.

On average, fresh vegetable prices rose 12.0% between January and February 2007. Prices for virtually all fresh vegetables were up. Cooler temperatures in the West Coast of the United States observed in January 2007, affected current harvests and drove up the price of vegetables.

February remains the most popular month for Canadian travellers who normally choose this month to escape to warmer destinations. The price of travel tours rose 11.3% in February, compared to January. This represents the highest increase since February 2004, a reflection of a slightly higher number of Canadians who took winter vacation this year.

The price of non-alcoholic beverages also rose 3.9% in February.

Following discounts in the previous month, the prices for men's clothing returned to more normal levels. With fewer sales and smaller discounts, prices rose 2.9% in February.

Few components of the all-items CPI experienced substantial drops between January and February 2007. One component that did was natural gas, the price of which fell 2.9%. Canadians enjoyed lower prices in this month, especially those living in Alberta, who paid 11.9% less in February.

Available on CANSIM: tables 326-0001, 326-0002, 326-0009, 326-0012 and 326-0015 to 326-0018.

Definitions, data sources and methods: survey number 2301.

More information about the concepts and use of the CPI are also available online in Your Guide to the Consumer Price Index (62-557-XIB, free) from the Publications module of our website.

Available at 7 a.m. online under The Daily module of our website.

The February 2007 issue of the Consumer Price Index, Vol. 86, no. 2 (62-001-XWB, free) is now available from the Publications module of our website. A paper copy is also available (62-001-XPB, $12/$111). A more detailed analysis of the CPI is available in this publication.

The March 2007 Consumer Price Index will be released on April 19.

For more information, or to enquire about the concepts, methods or data quality of this release, call Client Services (toll-free 1-866-230-2248; 613-951-9606; fax: 613-951-1539; prices-prix@statcan.gc.ca), Prices Division.

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