Consumer Price Index
The consumer price index (CPI) is a measure of the changes in the average price of a typical basket of goods and services purchased by consumers. The change in the CPI is the inflation rate. Higher inflation signifies a decrease in the ability of a typical consumer to purchase a fixed basket of consumer goods and services.
- In 2020, the annual average inflation rate in Canada was 0.7 per cent, down from 1.9 per cent in 2019.
- Inflation rates in Ontario and the Toronto Census Metropolitan Area (CMA) also declined in 2020.
- Lower inflation rates were observed throughout the major CPI sub-categories but the price increases for food and shelter were higher than in all other sub-categories.
- Inflation is forecasted to be higher in 2021 but is expected to remain below Bank of Canada’s 2 per cent inflation target until 2023.
Annual Inflation Rate
The annual average inflation rate in Canada, as measured by the annual change in the Consumer Price Index (CPI), was 0.7 per cent in 2020.
This was lower than the inflation rate of 1.9 per cent in 2019, and the lowest rate recorded in Canada since the 2008-2009 economic recession.
The inflation rate in Ontario and the Toronto Census Metropolitan Area (CMA) also slowed between 2019 and 2020 as follows:
- Ontario: down from 1.9 per cent to 0.7 per cent; and
- Toronto CMA: down from 2.0 per cent to 0.3 per cent
Lower inflation rates across Canada resulted from the reduced demand for many goods and services following COVID-19 measures put in place to slow the spread of the virus.
With the onset of the pandemic in March 2020, the headline inflation rate moderated substantially from above 2.0 per cent in the first two months of the year, to 0.9 per cent in March. The rate fell to a low of -0.4 per cent in May and remained relatively low for the remainder of the year.
Canadian Inflation Forecast
Based on private sector forecasts, Canadian average annual inflation rate will accelerate over in the next two years but will remain low by historic standards. The annual forecasts are as follows:
- 2021: 1.7 per cent; and
- 2022: 1.8 per cent.