Analysis

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Consumer prices fell 0.3% in June 2009 compared to June 2008, following a 0.1% increase in May. It was the first 12-month decline in the all-items Consumer Price Index (CPI) since November 1994.

The decrease was due primarily to a 12-month decline of 19.0% in prices for energy products, particularly gasoline. Excluding energy, the CPI rose 2.1% in June.

Gasoline prices fell 24.3% between June 2008 and June 2009, following a 12-month decline of 25.1% in May.

Nationally, the average retail price for regular, unleaded gasoline at self-service stations has been volatile, climbing to a peak of 136.6 cents per litre in July 2008 before reaching a low of 76.5 cents per litre in December 2008. In June 2009, unleaded gasoline prices at self-service stations averaged 101.6 cents per litre compared with 135.1 cents per litre last June.

Of the eight major components in the CPI, three recorded declines in the 12 months to June: transportation; shelter; and clothing and footwear. The most significant downward contributor was transportation, which includes lower prices for gasoline, as well as purchasing passenger vehicles.

In the shelter component, prices fell for natural gas, fuel oil and other fuels and homeowner’s replacement costs, continuing a downward trend.

The primary upward contributor on the CPI in June continued to come from higher food prices. However, the increase in food prices has been slowing since March 2009.

12-month change: Declines in shelter and transportation costs continue

Prices for the transportation component declined 7.7% in the 12 months to June, a slowdown from the 8.2% fall in May. The year-over-year drop in prices for gasoline and a fall in prices for passenger vehicles were the primary contributors.

The cost of purchasing passenger vehicles fell 5.2% in June, a slowdown from the 6.6% decline recorded in May and the 8.3% decline in April. An increase in passenger vehicle insurance premiums tempered the overall decline in the transportation component.

In the shelter component, prices declined 0.8% in the 12 months to June following a 0.2% drop in May. This was primarily the result of price declines for natural gas (-23.7%) and fuel oil and other fuels (-40.6%) and in homeowner’s replacement costs (-3.5%). Shelter costs were also dampened by reduced upward pressure from mortgage interest costs.

The mortgage interest cost index, which measures the change in the interest portion of payments on outstanding mortgage debt, rose 0.9% in June, following the increase of 1.9% in May. The gradual slowing in the mortgage interest cost index reflects the downward trend in mortgage interest rates and housing prices.

In the clothing and footwear component, prices for clothing fell 3.6%. The primary contributor was a 6.1% drop in prices for women’s clothing.

Food costs continued to put significant upward pressure on prices, albeit to a lesser degree than in previous months. In the 12 months to June, food prices rose 5.5%, compared with increases of 6.4% in May and 7.1% in April. The main factor was higher prices for food purchased from stores, which rose 6.4% in June after a 7.4% increase in May.

In addition, price increases for food purchased from restaurants have been slowing. In the 12 months to June, prices for food purchased from restaurants rose 3.6%, following an increase of 4.0% in May and 4.2% in April.

Provinces: Consumer prices down in four provinces

Consumer prices on average declined in four provinces between June 2008 and June 2009: Prince Edward Island, Nova Scotia, Alberta and British Columbia.

The main downward contributors in all provinces were price declines for gasoline and other energy components. The main upward push came from rising prices for various food items.

Consumer prices declined at the fastest pace in Alberta (-1.6%) and Nova Scotia (-1.1%).

In Alberta, prices were down for the third consecutive month. The main factor in the 12 months to June was a 6.3% decrease in shelter costs, a much larger fall than the national decline of 0.8%. This was mainly due to drops in natural gas prices and homeowner’s replacement costs.

In Nova Scotia, the main contributor to the decline in consumer prices was a 3.0% fall in shelter costs.

On the other hand, consumer prices rose 1.0% in Saskatchewan, the fastest increase. This was due to a 3.3% rise in costs for shelter.

In Central Canada, consumer prices in Ontario posted no change in the 12 months to June, while they rose 0.2% in Quebec.

Month-to-month seasonally unadjusted CPI increases

Consumer prices prior to seasonal adjustment rose 0.3% from May to June, after increasing 0.7% from April to May.

Upward pressure on the monthly CPI came primarily from higher prices for gasoline and to purchase passenger vehicles. Consumers paid on average 6.8% more at the pump in June compared to May.

A drop in prices for men’s and women’s clothing and furniture, and in costs for mortgage interest helped to dampen the overall rise in the monthly CPI in June.

Consumer prices in almost all provinces gained momentum in June from May. This was largely due to an increase in pump prices across the country.

Seasonally adjusted monthly CPI increases

On a seasonally adjusted monthly basis, the CPI rose 0.3% from May to June, after increasing 0.2% from April to May. June’s increase was due primarily to a 2.3% rise in the transportation cost index. A monthly increase in prices for gasoline in June compared to May largely accounted for the rise.

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

The Bank of Canada's core index advanced 1.9% over the 12 months to June, following the 2.0% rise posted in May.

On a month-to-month basis, the core index prior to seasonal adjustment posted no change from May to June, after increasing 0.4% from April to May.

The seasonally adjusted monthly core index increased 0.2% from May to June, after posting a 0.3% rise from April to May.