Analysis

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Consumer prices rose 1.2% in the 12 months to March 2009, down from the 1.4% increase in February.

The upward pressure on the Consumer Price Index (CPI) came primarily from two sources: higher food and shelter costs.

Food prices, the largest factor, rose 7.9% during the 12-month period to March, on the heels of a 7.4% rise in February. March’s increase was the largest since November 1986.

Shelter costs, the second largest factor, advanced at a 12-month rate of growth of 2.1% in March, after increasing 3.0% in February. While still a major contributor to consumer price growth, the 12-month change in the shelter price index has slowed since reaching a peak of 5.4% in July 2008.

Mitigating the overall increase in the CPI was a 6.2% decline in transportation costs. Year-over-year price drops for gasoline and for purchasing and leasing passenger vehicles were the primary downward contributors. Increasing prices for passenger vehicle insurance mitigated the overall 12-month drop in transportation costs.

Excluding gasoline, the CPI rose 2.4% in the 12 months to March. Overall, energy prices fell 11.2% during the same period, a larger drop than February’s decline of 8.8%.

12-month change: Food prices continue to push up consumer prices

Of the eight major components in the CPI, six recorded increases in the 12 months to March: food; shelter; household operations, furnishings and equipment; health and personal care; recreation, education and reading; and alcoholic beverages and tobacco products.

Out of these major components, upward pressure on the CPI came largely from an increase in prices for food. Rising shelter costs were the second largest upward contributor to the increase in the CPI.

Sustained declines in transportation costs partly offset rising prices for food and shelter items. Continuing price declines for clothing and footwear items also helped to temper consumer price increases in the 12 months to March.

The cost of food continued to be pushed up primarily by prices for food purchased from stores, which rose 9.5%. Excluding food, the CPI fell 0.2% in the 12 months to March.

Food price increases were widespread in March 2009 compared to March 2008, with large price increases observed for fresh vegetables (+26.5%), fresh fruit (+19.3%), non-alcoholic beverages (+10.2%) and cereal products (+11.0%).

A 12-month price increase of 54.9% for potatoes pushed up vegetable prices. This occurred largely as a result of poor harvests in Canada that led to a reduction in supply.

Price increases were also observed for meat (+7.6%) and bakery products (+7.4%). Meat prices rose mainly because of higher beef and chicken prices.

A 12-month rise of 4.2% for food purchased from restaurants in March also contributed to rising food costs for consumers.

March’s increase in shelter costs was due primarily to higher mortgage interest costs, natural gas prices and property taxes. The mortgage interest cost index, which measures the change in the interest portion of payments on outstanding mortgage debt was up 4.2% in March 2009 compared with March last year. This index has been slowing since reaching a peak of 9.0% in June 2008, reflecting the downward trend in mortgage interest rates and housing prices. March’s rise was the slowest rate of growth recorded since the 12-month rise of 3.9% in October 2006.

Mitigating the overall rise in costs for shelter were declines in prices for fuel oil and other fuels and homeowner’s replacement costs. Prices for fuel oil and other fuels posted a fourth consecutive 12-month decline, falling 32.9%.

Homeowner’s replacement costs represent the worn-out structural portion of housing and are estimated using new housing prices (excluding land). They declined 2.1% in March, on the heels of a 0.9% drop in February. This was the largest drop since June 1996.

The 6.2% fall in the transportation price index was due primarily to falling prices for gasoline and the purchase and leasing of passenger vehicles.

Gasoline prices were down 21.0% in March 2009 compared with March 2008, following a 19.7% decline in February. The 12-month decline in March was due more to high prices in 2008 than to recent developments. On a month-to-month basis, gasoline prices rose 2.0% from February to March.

The cost of purchasing and leasing passenger vehicles fell 7.4% in March, following a 6.4% year-over-year drop in February. The decline in March was a result of higher rebates offered on new vehicles.

Tempering the overall decline on transportation costs was a 6.4% increase in passenger vehicle insurance premiums.

Prices for clothing and footwear fell 0.3% in the 12 months to March, after falling 0.5% in February. A 1.1% decrease in clothing prices largely accounted for March’s drop.

Provinces: 12-month change in consumer prices slows in most provinces

Compared to February, growth in consumer prices slowed in all provinces except Ontario and Quebec in the 12 months to March. In Ontario, consumer prices rose 1.8%, larger than the 1.5% increase recorded in February.

The larger increase in Ontario was due primarily to a rise in passenger vehicle insurance premiums.

In Quebec, the growth in consumer prices held steady, advancing 0.8%.

With the exception of Ontario, the only other province to outpace the national average was Saskatchewan, where prices rose 1.8%. However, this was slower than the 2.6% rise posted in February. Larger price declines for gasoline and a fall in homeowner’s replacement costs were the primary reasons for the slowdown.

The 12-month rise in consumer prices in Alberta also slowed substantially, from 2.1% in February to 0.9% in March. The slowdown was due primarily to a 19.3% decline in natural gas prices, after increasing 4.5% in February.

Consumer prices fell 0.2% in Prince Edward Island in March 2009 compared with the same month last year. The decline was due primarily to a 24.2% drop in prices for gasoline and a 33.5% fall in prices for fuel oil and other fuels.

Shelter costs in Prince Edward Island fell 2.8%, much different than the 2.1% rise at the national level. Upward pressure on consumer prices in Prince Edward Island came primarily from rising prices for food items purchased from stores (+8.7%).

Of the eight major components, rising food prices were the main upward contributor in all provinces, while a decline in transportation costs was the primary downward contributor.

Month-to-month seasonally unadjusted change: Second consecutive increase

Consumer prices rose 0.2% from February to March, after rising 0.7% from January to February.

Increasing prices for gasoline, passenger vehicle insurance, women’s clothing and travel tours were the major upward contributors. Prices for gasoline rose 2.0% from February to March, following the 5.6% rise in February and the 5.0% increase in January.

Price declines for purchasing and leasing passenger vehicles (-1.9%) helped to ease consumer prices in March.

The monthly CPI slowed in all provinces between February and March.

The monthly change in consumer prices in Alberta (-0.5%), Manitoba (-0.1%) and Prince Edward Island (-0.1%) fell into negative territory in March.

Seasonally adjusted monthly CPI falls

On a seasonally adjusted monthly basis, the CPI fell 0.3% from February to March, after increasing 0.4% from January to February. March’s fall was due primarily to a 0.5% drop in the shelter price index. Tempering the fall was a 0.4% increase in prices for food and a 0.3% rise in transportation costs.

Excluding food and energy, the seasonally adjusted monthly CPI posted no growth from February to March, following a monthly rise of 0.3% from January to February.

12-month change in the Bank of Canada’s core index increases slightly

The Bank of Canada's core index advanced 2.0% over the 12 months to March, up slightly from the 1.9% rise posted in February.

On a month-to-month basis, the core index prior to seasonal adjustment rose 0.3% in March, following the 0.5% increase from January to February.

The seasonally adjusted monthly core index posted no growth from February to March, after increasing 0.4% from January to February.