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.
- The Canadian headline or year-over-year inflation rate was 0.7 per cent in June 2020, the last month of Q2 2020.
- Higher cost of food and shelter contributed to an acceleration in inflation in June after price fell in the preceding two months.
- With the onset of COVID-19, consumer’s consumption patterns shifted, making the actual inflation experienced by consumers higher than measured inflation.
Year-Over-Year Inflation Rate
Following the 0.9 per cent inflation rate recorded in March 2020, the Canadian headline or year-over-year inflation rate was -0.2 per cent and -0.4 per cent in April and May 2020 respectively.
The negative headline inflation rates recorded in the first two months of Q2 2020 were followed by an inflation rate of 0.7 per cent in June 2020.
The year-over-year decline in gasoline prices was less in June (-15.7 per cent) than in May (-29.8 per cent) and April (-39.3 per cent), reducing the downward pull on overall inflation and resulting in a higher inflation rate in June.
The inflation sub-categories which recorded the highest price increases in June remained food (2.7 per cent) and shelter (1.7 per cent).
Ontario and the Toronto Census Metropolitan Area (CMA) inflation also accelerated in June to respective rates of 0.4 per cent and 0.3 per cent.
Monthly Inflation Rate
Following two consecutive monthly declines of -0.6 per cent and -0.7 per cent in March and April respectively, the monthly inflation rate in Canada accelerated to above zero rates of 0.3 per cent and 0.8 per cent in May and June 2020.
Similar changes were observed in Ontario as follows;
- March 2020: -0.6 per cent;
- April 2020: -0.4 per cent;
- May 2020: 0.1 per cent; and
- June 2020: 0.8 per cent.
In Toronto CMA, the monthly inflation was negative, -0.3 per cent, -0.2 per cent and -0.1 per cent for March, April and May 2020 respectively, and rebounded to 0.7 per cent in June 2020.
Change in Consumption Patterns
Statistics Canada conducted a study which confirmed that Canadian consumption patterns changed during the pandemic, as consumers purchased more of some items, such as food and household supplies, and less of others like recreation and transportation.
As a result of the change, the inflation rate faced by Canadians was slightly higher than the measured inflation rate as shown below.
Year-Over-Year Inflation Forecast
The average private sector forecast for the headline inflation for Canada is as follows:
- 2020: 0.9 per cent
- 2021: 1.8 per cent