How to measure changes in Canada's grocery bill

Say you're at the grocery store and you notice that your favourite brand of peanut butter is 50 cents cheaper than the last time you bought it. But when you look carefully, you see that the jar is 25mL smaller. The next biggest size costs a little less per mL, and as far as you can tell, it is the same size and price as the month before. So, is your favourite peanut butter getting cheaper, or more expensive? What about the price of peanut butter in general?

Price check!

Statistics Canada's price collectors have that information. This team records the prices of approximately 100,000 consumer items each month, in 40 cities across Canada. Of these items, almost half (45,000) are food. Price collectors visit approximately 500 food retailers, from small local shops to big box supermarkets, and methodically record the prices of items on the shelves.

They also record any changes in size, weight, number of units in a box and other features that determine what consumers are actually paying for, and note when an item is discontinued.

Richard Evans, Director of Consumer Prices Division at Statistics Canada, describes how they work: "The price collectors operate very independently. They go down the aisles, most people think they're other shoppers. They just go around, check prices, and they're out."

Creating an index

Collectively, these data are used to create the Consumer Price Index (CPI), Canada's main measure of changes in price levels. The index is also used to inform monetary policy and adjust tax brackets, rent controls, transfer payments and pensions.

The CPI basket contains the vast majority of goods and services that Canadians buy. Each item in the basket is weighted according to its relative importance in the consumer's overall spending. For instance, in any given month, people spend less on chocolate compared with vegetables. As a result, vegetables are weighted more heavily in calculating the index.

"The CPI is in the best shape it's ever been," explains Mr. Evans. "We update the basket every two years. We've significantly increased the quality of the sample, the monthly pricing that we do. We've done that by adding more prices. We also have a better method for selecting stores, and for selecting products in stores, than we used to have. We're world leaders in this area."

To make sure that the data are free from manipulation, Statistics Canada is tight-lipped about which items are on the list and which stores its price collectors visit. Individual collectors also have some latitude in choosing what brands to include in their data. (Chances are your favourite peanut butter is being measured several times.)

What matters most in the data collection is that the price collectors are consistent: they visit the same roster of stores, at the same day and week each month, and record the price of the same brands. This way, the data can be compared month over month, and will not be affected by inconsistent methodology.

More expensive groceries...than in 2015

What the data show is that, from a historical perspective, overall food prices have been increasing at a relatively steady rate for many years. With very few exceptions, across all types of food purchased from stores, and all provinces and territories, consumers are paying more than they did in the past. In fact, in May 2017 they were paying about 41% more than in 2002. At the same time, the All-items CPI increased 30%, so during those 15 years, food prices climbed noticeably faster.

However, Canadians caught a small break in 2017. The overall price of food purchased from stores was slightly lower in May 2017 than in May 2016.

So why does my bill seem so high?

Several factors influence how much individuals and families pay for food—and how much they feel they are paying for food. The CPI accounts for some of these factors, such as regional differences in price, changing prices of different food products, and seasonal price fluctuations for certain items.

There is also the very human tendency, called the negativity bias, to be more affected by negative changes—in this case, higher prices—than positive ones. "We tend to remember bad news," says Mr. Evans. "Bad things strike us. And we tend not to focus so much on price declines."

Indexing the prices of so many consumer goods in Canada is a tricky art, and one that involves a great deal of knowledge. But Statistics Canada has been refining the CPI for 90 years, perfecting its methods and formula to create an increasingly precise measure. This makes the CPI Canada's most authoritative source of changes in price levels.