Canada’s national statistics agency, Statistics Canada, unveiled new weights for the basket of goods and services in its Consumer Price Index. These weights give more importance to changes in the prices of food and gasoline. The reweighting is carried out annually and typically has a minimal impact on the headline number. The updated basket weights will be applied to May’s inflation data, which will be released on June 27.
The adjustments in the weights reflect the changes between 2022 and 2021. According to Statscan, the modifications take into account the ongoing recovery from the COVID-19 pandemic. The spending patterns that gradually shifted back towards pre-pandemic norms in 2021 continued to become more apparent in 2022, with various sectors approaching their pre-pandemic basket weight shares.
Last year, COVID-related measures and disruptions to supply chains led to a significant increase in Canadian inflation, reaching a near-40 year high of 8.1 percent in June. However, the inflation rate has now dropped to 4.4 percent, still more than double the Bank of Canada’s 2 percent target.
Gasoline prices, driven up by increased demand and geopolitical tensions like Russia’s invasion of Ukraine, will now account for 4.27 percent of overall inflation, up from 3.47 percent. Gasoline is part of the larger transportation component, which has seen the most substantial increase among the major eight segments for the second consecutive year, rising to 16.94 percent.
The food component of the Consumer Price Index has expanded to 16.13 percent from 15.75 percent, reflecting the rise in sales at restaurants as lockdown measures were eased. On the other hand, the shelter component has decreased to 28.22 percent from 29.67 percent, partly due to reduced costs for rent and other accommodation expenses as the housing market cools.
As for specific items in the basket, DVD players have been removed for 2023 as their popularity has waned with the rise of streaming services. Conversely, charcoal barbecues and snow removal equipment have been added.
Overall, the rebalancing of the basket of goods and services takes into account the evolving economic conditions and shifts in consumer behavior. By assigning new weights to different categories, Statistics Canada aims to provide a more accurate representation of the cost of living for Canadians.
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Omprakash Tiwary is a business writer who delves into the intricacies of the corporate world. With a focus on finance and economic landscape. He offers readers valuable insights into market trends, entrepreneurship, and economic developments.
