Consumer Price Index: Frequently asked questions

What is the CPI?

The Consumer Price Index (CPI) represents changes in prices as experienced by Canadian consumers. It measures price change by comparing, through time, the cost of a fixed basket of goods and services.

The goods and services in the CPI basket are divided into 8 major components: Food; Shelter; Household operations, furnishings and equipment; Clothing and footwear; Transportation; Health and personal care; Recreation, education and reading, and Alcoholic beverages, tobacco products and recreational cannabis. CPI data are published at various levels of geography including Canada, the ten provinces, Whitehorse, Yellowknife and Iqaluit.

The Consumer Price Index is one of the most widely used measures of inflation. The All-items CPI and its sub-aggregates can be used to calculate the price change between any 2 periods, the most commonly used calculation being the 12-month % change. Data users who rely on the CPI for indexation purposes are advised to use this indicator as it reflects actual price movements observed during a given period.

For further information on the concepts and use of the CPI, see The Canadian Consumer Price Index Reference Paper (Catalogue number 62-553-X).

Is the CPI a cost of living index?

The Consumer Price Index (CPI) is not equivalent to a cost-of-living index (COLI). The CPI has often been used to approximate cost-of-living but it is important to note that the CPI and COLI are not directly comparable.

The CPI is based on a fixed basket of goods and services, which represents the average Canadian household's spending habits. The CPI measures the average change in retail prices encountered by all consumers in Canada.
By contrast, the objective of a COLI is to measure price changes experienced by consumers in maintaining a constant standard of living. A COLI can be linked to the notion of the minimum amount of money that would be necessary in different periods of time to ensure a given level of "well-being".

In short, the CPI measures the change in the cost of a fixed basket of goods and services, whereas a COLI measures the change in the cost of a fixed level of "well-being".

Are there other programs related to the CPI?

The following is a list of programs related to the CPI:

Are the CPI data ever revised?

The Consumer Price Index is not subject to revision due to the extensive use of these series for indexation purposes. While the accuracy of the CPI is very important to Statistics Canada, it is inevitable that errors can occur in spite of best efforts to avoid them. A great deal of effort is expended to ensure that errors are prevented and that the CPI is a high quality indicator of the rate of consumer price change.

If you were to introduce a revisable CPI, revisions could sometimes be upward and sometimes downward. As a result, anytime there was such a revision, the public and private sectors would be required to either make payments or collect overpayments. The uncertainty arising from revisions would lead to generally higher costs in the economy if wage and contract payments could not be considered as final when they occur.

To avoid unexpected fluctuations in the CPI and therefore changes in the many payments and contracts indexed to the CPI, Statistics Canada's practice is to not revise the CPI. The non-revision practice of the Canadian CPI is consistent with the general practice of most national statistical agencies around the world and was confirmed in a resolution on CPI adopted by the International Labour Organization.

How does the CPI determine what's included in its Basket of Goods?

The CPI uses data from the SHS as well as data from other sources to calculate the proportions of various items in the CPI basket of goods which represents the total expenditures of the average Canadian consumer. For example Canadians spend approximately 16% of their household budget on Food, (which further breaks down in other categories), 27% on Shelter, and 19% on Transportation, etc.

For additional details on the Basket of Goods, see An Analysis of the 2019 Consumer Price Index Basket Update, Based on 2017 Expenditures.

What are basket weights and how are they used in the CPI?

Basket weights show the relative importance of the various goods and services in the overall CPI basket. The items in the basket are weighted according to consumer expenditure patterns. For example, Canadians spend a much larger share of their total budget on rent than milk: thus a 10% increase in rental rates will have a greater impact on the All-items CPI than a 10% increase in the price of milk.

The CPI basket shares are updated every two years. The reference year of the most recent basket is 2017 (basket link month, December 2018).

For further information, see An Analysis of the 2019 Consumer Price Index Basket Update, Based on 2017 Expenditures.

Are all provinces and territories weighted equally in the CPI?

Price movements in each province and territory are weighted according to the relative importance of that province to overall consumer spending in Canada. These are known as expenditure shares.

For example, Ontario carries an expenditure share of 39.83%, which means that consumption in Ontario represents 39.83% of all household consumer spending in Canada (2017 basket weights at link month prices).

For further information on expenditure shares, see the Basket weights of the All-items Consumer Price Index by geography, Canada, provinces, Whitehorse, Yellowknife and Iqaluit table.

Why are some series available at the Canada level, but not at the lower levels of geography?

Some CPI items may only be published for a limited number of geographic regions due to differences in their importance to household budgets in those regions. For example, "Fuel oil and other fuels" is not published at the Alberta level as its share of consumer expenditures in that province is negligible.

Additionally, accuracy is best at higher levels of geographic and product aggregation due to the larger sizes of the price samples for high levels of aggregation. Indexes are only published that are believed to be of sufficient quality and accuracy.

Indexes may also not be published at low levels of a geographic of product classification to maintain survey respondent confidentiality, as required under the Statistics Act. If the sample size is too small for a given product in a specific region, it may be possible for users of the data to identify survey participants.

I have observed fluctuating product sizes in items such as prepackaged food. How does the CPI account for such changes?

The CPI is obtained by comparing, over time, the cost of a fixed basket of goods and services purchased by consumers. Since the basket contains goods and services of unchanging or equivalent quantity and quality, with the use of quality adjustment methods, when required, the index reflects only pure price change.

When interviewers collect information on prices of goods and services for the CPI, they are instructed to collect all the relevant information related to the quantity and quality of these goods and services, not just the prices. This information is then used by CPI commodity specialists when they process the prices to ensure that we are comparing the prices of identical or equivalent items over time. When identical items cannot be found, a substitution is required and a quality assessment, including a comparison of the quality, is performed. If the quality has changed, a quality adjustment is applied.

One type of quality adjustment is quantity adjustment. This entails accounting for changes in the quantity (e.g. package size, number of tissue ply, etc.) of observed product offers; for example, if the size of a juice box becomes smaller but the sticker price does not change, consumers are implicitly paying more for the item, so an adjustment is made to ensure a price increase for this item would be reflected in the CPI.

Quantity adjustment is the default treatment for nearly all of the product offers in the Food major aggregate, for which it is common to observe changes in quantity over time. Many of the products in the Household operations aggregate and Personal care supplies and equipment aggregate employ quantity adjustments as well.

For further information on data quality and the CPI, visit the Consumer Price Index page.

What is the base period?

The base period is also referred to as the index reference period. The CPI is arbitrarily set to equal 100 in the index base period. Therefore, all index values express price change in percentage terms in comparison to the index base period. For example, if the index is 123.4, that means prices have increased 23.4% since the base period. The current index base period of the CPI is 2002.

More information on the base period can be found in The Canadian Consumer Price Index Reference Paper.

What is the year over year, or 12-month percent change?

The 12-month % change is the most commonly reported CPI figure. This calculation is used to compare price indices in a given month to price indices in the same month of the preceding year (e.g. January 2018 compared to January 2017).

Example: CPI 12-month % change in January 2018 = ((January 2018 CPI value ÷ January 2017 CPI value) − 1) × 100 = ((131.7 ÷ 129.5) − 1) × 100 = 1.7%

What is the month over month, or 1-month percent change?

The 1-month % change, also referred to as the month-over-month % change, is used to compare price indices in a given month to price indices in the preceding month (e.g. November compared to October).

Example: CPI 1-month % change in February 2018 = ((February 2018 CPI value ÷ January 2018 CPI value) − 1) × 100 = ((132.5 ÷ 131.7) − 1) × 100 = 0.6%

What is seasonally adjusted data? How does it factor into consumer prices?

The practice of seasonal adjustment is used to isolate and then remove seasonal price movements from indices (seasonal and calendar influences that normally occur at the same time, and in about the same magnitude, every year) to get a better picture of "true" or "underlying" consumer price inflation in the economy. Seasonally adjusted data are revised on a monthly basis and are available in the Consumer Price Index, monthly, seasonally adjusted table.

Additionally, some of the Bank of Canada's core measures of inflation are calculated using seasonally adjusted data available in the Consumer Price Index (CPI) statistics, measures of core inflation and other related statistics - Bank of Canada definitions table.

For further information, see Seasonally adjusted data - Frequently asked questions.

What are the measures of core inflation?

CPI-common: This core inflation measure tracks common price changes across categories in the CPI basket. It uses a statistical procedure called a factor model to detect these common variations, which helps filter out price movements that might be caused by factors specific to certain components.

CPI-median: This core inflation measure corresponds to the price change located at the 50th percentile (in terms of the CPI basket weights) of the distribution of price changes in a given month. It helps filter out extreme price movements specific to certain components.

CPI-trim: This core inflation measure excludes CPI components whose price changes in a given month are located in the tails of the distribution of price changes (the top and bottom 20% of the weighted monthly price changes). These excluded components can vary from month to month.

For further information, see Consumer Price Index: The Bank of Canada's Preferred Measures of Core Inflation Methodology Document.

What is the Consumer Price Index annual average?

The CPI annual average series represents the average of all monthly price index values in a given calendar year (i.e., average of the 12 monthly index values from January to December). Not to be confused with the 12-month % change, which is the price change between the index value in a particular month and year and the same month in the previous year (e.g., January 2018 and January 2017).

The annual average % change is used to compare two consecutive annual average price indices.

Example: CPI annual average % change in 2017 = ((2017 CPI value ÷ 2016 CPI value) − 1) × 100 = ((130.4 ÷ 128.4) − 1) × 100 = 1.6%

How are sales taxes and income taxes treated in the CPI?

The prices included in the CPI are final prices, inclusive of all excise and other taxes paid by consumers. In particular, prices include the Goods and Services Tax (GST), provincial retail sales taxes, or harmonized sales taxes, as well as any environmental, liquor and tobacco taxes if applicable. This means that the CPI could change as a result of changes in any of these types of taxes.

In contrast, the CPI does not include changes in personal income taxes because these are considered transfers and are out of scope for the CPI.

Can I see consumer price data excluding taxes?

Yes – the All-Items Consumer Price Index excluding indirect taxes is based on the CPI All-items index. The effect of indirect taxes (mainly sales taxes, such as HST or PST) is removed in order to show how prices have changed independent of these influences.

Can I access raw CPI data for my own calculations?

The information collected for the purposes of calculating the Consumer Price Index (CPI) is confidential as defined by the Statistics Act. Thus, Statistics Canada is prohibited by law from releasing any data that would divulge information obtained under the Statistics Act that relates to any identifiable person, business or organization without the prior knowledge or the consent in writing of that person, business or organization.

Therefore, we are unable to provide access to our raw data. The CPI raw data cannot be made available through the Regional Data Centre (RDC) nor the Data Liberation Initiative (DLI).

Are CPI microdata available for research purposes?

A CPI microdata file is available from the Canadian Centre for Data Development and Economic Research (CDER), allowing researchers to conduct analyses on consumer prices.

For more information, visit The Canadian Centre for Data Development and Economic Research (CDER) web page.

Is there an interactive tool for the CPI data?

Users can access the Consumer Price Index Data Visualization Tool to manipulate the CPI data to create custom views based on their interests.

How can I calculate a non-calendar year annual average percentage change using the CPI?

In order to find an annual average percentage change, you must divide the current non-calendar year annual average index by the previous non-calendar year annual average index. To do this, you must first obtain 24 monthly indexes (12 indexes from the current non-calendar year and 12 indexes from the previous non-calendar year).

Once you have obtained the 24 monthly indexes, you must calculate the arithmetic average of the 12 monthly indexes for each non-calendar annual period. To find an annual average, you must add the 12 indexes for each annual period, then divide the number by 12.

Using the non-calendar year annual average indices that you have just calculated, follow the formula below:

(Current annual average index / previous annual average index – 1 ) x 100 = the annual average percentage change (%)

Finally, round the result to one decimal place.

How do I convert an index so that it has a different base period?

In order to convert an index to a different base period, you must first calculate a conversion factor. To calculate a conversion factor, you must obtain an annual average index value for the year that you wish to make as your base period.

For example, you wanted to obtain the all-items CPI for Canada for March 2009 using a base period of 1986=100, you would have to calculate the annual average index value for the year 1986 with the current base period (2002=100), which is 65.6.

Divide the annual average index by 100 to obtain the conversion factor.
65.6 / 100 = 0.656, therefore, the conversion factor is 0.656.

Next, divide the index value for the month you are rebasing by the conversion factor.
114.0 (March 2009 index with base period 2002=100) / 0.656 (conversion factor) = 173.8

The all-items CPI for Canada for March 2009 is 173.8 with a base period of 1986=100.

You can verify the rebased index by simply multiplying it by the conversion factor. The index will return to its initial level with the original base period. By doing this calculation, you are rebasing the index back to 2002=100.
173.8 (1986=100) x .656 = 114.0 (2002=100)

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