Friday, July 17, 2009

How is inflation measured in Canada?

Statistics Canada tracks inflation through the consumer price index (CPI), a basket of about 600 goods and services the average Canadian household consumes. Most prices are checked during monthly visits to major retailers. Other prices are checked by phone or on the internet. Nationally, about 650,000 prices are checked each year.

Prices are weighted by their importance in the total budget, so a 10 per cent increase in rent would have a bigger impact on the CPI than a similar increase in the price of bread.

The CPI is measured against a base year, which is currently 2002. So, if Statistics Canada reports that the "all-items" CPI hit 115.3, it means that it would take $115.30 to pay for a typical basket of goods and services that cost $100 in 2002.

In June 2009, the all-items index was 115.1, down from 115.4 in June 2008. The index would have gone up if it weren't for falling gasoline prices. The transportation index dropped 7.7 per cent from June 2008. Transportation makes up 19.88 per cent of the all-items index. That's second only to shelter, which makes up 26.62 per cent of the index.

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