Analysis

Consumer prices rose 1.9% in the 12 months to January 2010, following a 1.3% increase in December 2009. January’s increase was the largest since November 2008.

The increase in the all-items Consumer Price Index (CPI) was due primarily to gasoline prices. In January 2010, gasoline prices were 23.9% higher than they were in January 2009. This follows a 25.6% rise in the 12 months to December 2009.

Gasoline prices exerted upward pressure on the CPI for the third consecutive month due to price volatility in the second half of 2008 and the first half of 2009. Prices at the pump have been relatively stable since July 2009.

Overall, energy prices went up 8.2% between January 2009 and January 2010, following a 5.9% increase in the 12 months to December 2009.

Excluding energy, the CPI rose 1.3% in the 12 months to January, compared with a 0.8% increase posted in December.

As well, prices for the purchase of passenger vehicles exerted upward pressure on the CPI in January, after an extended period in which they were a significant source of downward pressure on the CPI.

12-month change: Six of the eight major components in the CPI post increases

In January, six of the eight major components of the CPI recorded price increases. The exceptions were shelter, and clothing and footwear.

Prices in the transportation component exerted the strongest upward pressure on the all-items CPI, increasing 7.7% in the 12 months to January. This was the largest 12-month increase for this component since the 9.2% increase in September 2005.

In addition to higher prices at the pump, consumers paid 7.7% more for passenger vehicle insurance premiums. As well, prices for the purchase of passenger vehicles rose 3.1% in January, following a 3.3% decline in December. January’s increase in passenger vehicle prices was the first 12-month rise since June 2007.

Food prices advanced 1.4%, following a 1.7% increase in December. January’s rise was the smallest since April 2008.

Upward pressure on the food index came mainly from prices for food purchased from restaurants (+2.6%) and non-alcoholic beverages (+7.2%).

Other major contributors to the increase in food prices were all other food preparations and sugar and confectionery. On the other hand, prices fell for fresh fruit, fresh vegetables, and meat.

Prices in the household operations, furnishing and equipment component rose 2.1%. Upward pressure came from communications, other household goods and services, and child care and domestic services.

Broad-based price advances occurred in the health and personal care component (+3.1%).

Prices in the recreation, education and reading component increased 1.4% in the 12 months to January. Major contributors to the increase were tuition fees and cablevision and satellite services. In contrast, prices fell for home entertainment equipment, parts and services and computer equipment and supplies.

Shelter costs declined 1.1% during the 12-month period, mostly the result of declines in mortgage interest cost and natural gas prices.

The mortgage interest cost index, which measures the change in the interest portion of payments on outstanding mortgage debt, fell 5.5% in January, following a 4.9% decrease in December.

Upward pressure on the shelter component came from property taxes (+4.3%) and rent (+1.4%).

Prices for clothing and footwear dropped 1.9% on a year-over-year basis. The strongest downward pressure in this component came from prices for women’s clothing (-6.8%) and children’s clothing (-4.8%).

Provinces: Consumer prices up in all provinces

Consumer prices were up in all provinces in the 12 months to January. The most significant upward pressure on prices in all provinces came from higher gasoline prices.

The largest year-over-year increases among provinces occurred in Atlantic Canada: Prince Edward Island (+4.0%), New Brunswick (+3.9%), Newfoundland and Labrador (+3.2%), and Nova Scotia (+3.1%).

Higher price rises in Atlantic Canada were primarily attributed to larger upward movements in gasoline prices. Gasoline price increases in Atlantic Canada ranged from 26.5% in Newfoundland and Labrador to 35.6% in New Brunswick.

As well, prices for fuel oil and other fuels in Canada advanced 9.7% between January 2009 and January 2010, the largest increase since October 2008. These energy products are widely used in home heating in Atlantic Canada, while the rest of the country relies mostly on electricity and natural gas.

In Ontario, prices rose 1.9%. This was due primarily to higher prices for gasoline, passenger vehicle insurance, and the purchase of passenger vehicles. Downward pressure came from lower prices for natural gas.

In Alberta, consumer prices went up 1.7%. Major contributors to higher prices were the cost of gasoline and natural gas.

Prices in British Columbia rose 0.7%, with gasoline prices up 18.4%. At the same time, shelter costs fell 2.4%, more than twice the rate of the decline of 1.1% at the national level.

Month-over-month seasonally unadjusted CPI increases

Consumer prices prior to seasonal adjustment increased 0.3% from December to January, after falling 0.3% from November to December.

Five of eight major components of the CPI recorded month-over-month increases in January: transportation; shelter; food; household operations, furnishings and equipment; and health and personal care.

Monthly increases in transportation prices (+1.5%) were driven by private transportation, particularly gasoline (+3.6%) and the purchase of passenger vehicles (+1.0%).

Shelter costs rose 0.4% in the wake of month-over-month increases in prices for natural gas, water, and fuel oil and other fuels. On the other hand, declines in mortgage interest cost and electricity dampened the increase in the shelter index.

Increases in the household operations, furnishings and equipment index (+0.4%) were mainly due to upward price movements for telephone services (+1.3%).

The food index went up 0.4% from December to January. Major contributors to the higher food prices were non-alcoholic beverages, other fresh fruit, and all other food preparations. On the other hand, prices for lettuce and oranges declined.

In contrast, recreation, education and reading (-1.7%) exerted the most downward pressure on the monthly CPI. The most significant contributor to the decline was the cost of travel tours.

Seasonally adjusted monthly CPI increases

On a seasonally adjusted monthly basis, the CPI rose 0.4% from December to January, after remaining unchanged from November to December. January’s increase was due mainly to a 1.5% increase in the transportation index.

The seasonally adjusted monthly CPI has increased in six of the past eight months.

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

The Bank of Canada's core index advanced 2.0% over the 12 months to January, following a 1.5% rise in December. The increase was due primarily to a rise in prices for the purchase of passenger vehicles in January.

On a month-to-month basis, the core index prior to seasonal adjustment increased 0.1% from December to January.

The seasonally adjusted monthly core index went up 0.2% from December to January, after posting no change from November to December.