Analysis

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Consumer prices were 0.9% lower in September 2009 than they were in September 2008, following a 12-month decline of 0.8% in August.

The major contributor to the year-over-year decline in the Consumer Price Index (CPI) in September was energy products, as it has been for a number of months. Overall, in the 12 months to September, energy prices fell 18.7%.

Excluding energy, the CPI rose 1.3% between September 2008 and September 2009.

Consumers paid 23.0% less at the pump in September than they did a year earlier, compared with a 21.2% drop in August.

Transportation costs fell 7.2% in the 12 months to September, making this component the most significant downward contributor to the drop in the CPI. This decrease was due to 12-month price declines for both gasoline and passenger vehicles.

A 1.8% drop in the shelter component also exerted downward pressure on the CPI. Prices for natural gas, fuel oil and other fuels, and mortgage interest cost were significantly lower than in September 2008.

The primary upward pressure on the CPI came from food prices, which increased 2.8% in the past 12 months. However, this was the slowest rate of growth posted since June 2008. Both food purchased from stores and from restaurants were responsible for the rise of the food component.

Among other components recording price increases were: household operations, furnishings and equipment (+2.2%), health and personal care (+3.9%), and recreation, education and reading (+1.0%).

12-month change: Transportation, shelter, and clothing and footwear continue to exert downward pressure on the CPI

Three of the eight major components in the CPI recorded decreases in the 12 months to September: transportation, shelter, and clothing and footwear.

In addition to lower prices for gasoline, consumers paid 5.9% less for purchasing passenger vehicles, following a 4.7% decrease in August. A 5.1% increase in passenger vehicle insurance premiums mitigated the overall drop in the transportation component.

The decline in shelter costs in September was primarily the result of continuing price decreases in natural gas (-33.0%), fuel oil and other fuels (-32.7%), and homeowner’s replacement costs (-3.7%). Shelter costs were also dampened by downward pressure from mortgage interest costs.

The mortgage interest cost index, which measures the change in the interest portion of payments on outstanding mortgage debt, fell 2.2% in September, following a 1.1% decrease in August.

An 8.0% increase in homeowners’ maintenance and repairs costs and a 3.2% rise in property taxes slowed the decline in the shelter index.

Clothing and footwear prices fell 1.2% between September 2008 and September 2009, led by lower prices for both women’s (-3.3%) and men’s clothing (-1.3%).

Food costs continued to be pushed up by higher prices for food purchased from stores (+2.7%). Prices for meat went up 2.6% while prices for fish rose 8.8%.

As well, increases were recorded for dairy products and eggs (+2.5%), sugar and confectionery (+8.7%) and food purchased from restaurants (+2.8%).

On the other hand, prices for fresh fruit declined 4.5% in the past 12 months.

Broad-based price advances were recorded in the household operations, furnishings and equipment component. Prices rose for household goods and services, child care and domestic services, paper, plastic and foil supplies and telephone services in the 12 months to September.

In the recreation, education and reading component, the cost of cablevision and satellite services increased 6.7%. Students paid 4.1% more in tuition fees and 7.4% more for school textbooks and supplies. These increases were partly offset by declines in the prices of traveller accommodation (-5.8%) and computer equipment and supplies (-10.7%).

Provinces: Consumer prices down in nine provinces

Consumer prices declined in nine provinces between September 2008 and September 2009. The fastest declines occurred in Prince Edward Island (-1.4%), British Columbia (-1.2%), Alberta (-1.1%) and Ontario (-1.1%).

The most significant downward pressure on prices in all provinces came from lower gasoline prices, which fell by as much as 26.0% in Alberta compared with September 2008.

Factors putting upward pressure on consumer prices varied considerably from province to province, but rising food prices were common across them all.

In British Columbia, prices were down for the fourth consecutive month. The two main contributors in the decline were a 16.3% decrease in energy costs and a 14.5% drop in homeowner’s replacement costs.

In Alberta, the main factor was a 3.2% decrease in shelter costs, a much larger drop than the 1.8% national decline. This was due mainly to falling prices in natural gas, electricity, and homeowner’s replacement costs.

In Ontario, consumer prices fell 1.1%. Energy prices in Ontario declined 20.5% between September 2008 and September 2009.

The only province in which prices rose in the 12 months to September was Saskatchewan (+0.2%), where seven of the eight major components in the CPI recorded increases. The only component registering a decline was transportation (-10.3%).

No change in month-over-month seasonally unadjusted CPI

Overall, consumer prices prior to seasonal adjustment remained unchanged for the second consecutive month in September.

Upward pressure on the monthly CPI came primarily from higher prices for clothing and footwear (+3.0%) and household operations, furnishings and equipment (+0.8%).

Monthly increases in clothing and footwear were driven by women’s (+6.5%) and men’s clothing (+2.1%).

Advances in the household operations, furnishings and equipment index was mainly due to price increases in telephone services (+1.6%) in September.

On the other hand, price decreases for food (-0.9%) and transportation (-1.0%) tempered the overall rise in the monthly CPI in September.

Month-over-month downward movements in the food index came from food purchased from stores (-1.5%), mainly from a 10.8% drop in fresh vegetables and a 5.4% decline in fresh fruit.

Moreover, the monthly decline in transportation was due to falling prices for the purchase of passenger vehicles (-2.2%) and gasoline (-1.5%).

Seasonally adjusted monthly CPI increases

On a seasonally adjusted monthly basis, the CPI rose 0.1% from August to September, after rising 0.3% from July to August. The seasonally adjusted monthly CPI has gone up in four of the past five months.

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

The Bank of Canada's core index advanced 1.5% over the 12 months to September, following a 1.6% rise in August. This was the slowest increase since the 1.5% increase recorded in July 2008.

On a month-to-month basis, the core index prior to seasonal adjustment increased 0.3% from August to September.

The seasonally adjusted monthly core index went up 0.1% from August to September, matching the rate of growth recorded from July to August.