August of 2012 Sees Consumer Prices Increase More Slowly in Canada

Posted by Alan Zunec on Friday, October 5th, 2012 at 5:09pm.

August of 2012 saw a 0.2 percent increase in the Canadian consumer price index, or CPI. That may not seem like good news but it did follow three months that all showed declines. Comparing that same month to August of 2011, we find that consumer prices increased by 1.2 percent. If you adjust the current year figure to account for seasonality, the CPI comes out at 0.4 percent. The Bank of Canada, when looking at the core measure, came up with a 0.3 percent increase on the unadjusted as well as the adjusted seasonal rate.  Core inflation decreased to 1.6 percent this past August, the slowest rate in nearly 12 months.

Consumer Prices

Looking at consumer prices for August, electricity, women’s wear, passenger cars and trucks, and gasoline were all up from figures in this past July. At the same time air transportation, children’s wear, fresh fruit and vegetables all saw price decreases, which helped offset inflation figures.  August clothing prices increased by 0.4 percent, after that same industry saw declines for the prior three months. Prices were 1.2 percent less than in August of 2011.

As far as transportation, which makes up 20.6 percent of the CPI, that industry saw an increase of 0.9 percent, but that increase was only 1.8 percent more than seen in August of 2011. Automobile prices were up 2 percent from August of last year, less than the 3 percent gain saw in the second quarter of 2012. Gas prices went up 2.2 percent when comparing August 2012 to the same month in 2011. Gas was up 2.7 percent when compared with July of 2012. Food prices remained stable from July to August, but did show a 2.2 percent increase from August of last year.

Looking at Core Rates

If we take out the eight most unpredictable components of that CPI, the figure saw a 1.6 percent increase this August compared to the same month in 2011. This is the core rate, helped largely by increases in electricity costs and auto prices. The clothing price decrease of 1.2 percent decreased the core price somewhat.

Inflation is expected to be fairly benign, with the figures for 2012’s third quarter expected to be on par with that of mid-2010. The Bank of Canada has also calculated the rate of core inflation at a lower rate, coming in at 1.6 percent, less than the predicted 2 percent growth. Indicators show the economy, at least for 2012’s third quarter, to be similar to the three previous quarters.

In 2012’s second quarter, there was roughly a 0.5 percent slack in the core rate. The unemployment rate sits at 7.3 percent, which is a positive sign that the market is not seeing a tightening in that regard. In 2013 Canada’s economic growth is expected to increase as the financial situation in the United States and the European Union improves. The Bank of Canada will no doubt keep a close eye on the global situation as well as cut back on the stimulus policies to avoid affected inflation on the domestic front.

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