- The March 2023 report shows a 4.3% increase in CPI year-over-year in Canada, which is the smallest increase since August 2021.
- Excluding food and energy, prices were up 4.5% year-over-year in March 2023, and the increase in prices is widespread and not limited to specific categories of goods and services.
- The decline in CPI is due to a decline in energy prices, offset by an increase in mortgage interest costs.
Editor’s Notes: In this report, we have used data from the Statistics Canada website.
The Consumer Price Index (CPI) is an essential tool used to measure the price changes of a basket of goods and services that Canadian households purchase. It is released monthly, and the March 2023 report shows a 4.3% increase in Consumer Price Index (CPI) year-over-year. In this article, we will dive into the details of the report, looking at the different categories of goods and services that saw price changes, the factors that contributed to these changes, and what the numbers mean for Canadian consumers.
Smallest Increase in Consumer Price Index Since August 2021
The 4.3% year-over-year increase in Consumer Price Index (CPI) for March 2023 is a significant decrease from the 5.2% increase in February 2023. It is also the smallest increase since August 2021, which saw a 4.1% increase in CPI year-over-year. The decrease in CPI is due to a decline in energy prices, offset by an increase in mortgage interest costs.
Excluding Food and Energy
Excluding food and energy, prices were up 4.5% year-over-year in March 2023, following a 4.8% increase in February 2023. The all-items Consumer Price Index (CPI) excluding mortgage interest cost rose 3.6%, after increasing 4.7% in February 2023. This shows that the increase in prices is widespread and not limited to specific categories of goods and services.
Every month, the Consumer Price Index (CPI) increased by 0.5% in March 2023, following a 0.4% increase in February 2023. The increase in travel tours by 36.7% contributed the most to the headline month-over-month movement. This was mainly driven by increased seasonal demand during the March break. However, on a seasonally adjusted monthly basis, the CPI rose only 0.1%.
Impact of Base-Year Effects on Consumer Price Index
Base-year effects refer to the impact that price movements from 12 months earlier have on the current month’s headline consumer inflation. In the first half of 2022, the global economy was affected by the Russian invasion of Ukraine, resulting in significant price increases from January to June 2022. Headline consumer inflation increased from 5.1% in January to 8.1% in June 2022. These broad price increases had a downward impact on the year-over-year rate of consumer inflation in March 2023, as higher prices from March 2022 were used as the basis for year-over-year comparison.
Slowdown in Headline Inflation
The slowdown in headline inflation reflects a base-year effect following strong price increases in March 2022. The infographic shows that while headline inflation has slowed in recent months, prices remain elevated. Users should consider the impact of base-year effects when interpreting the 12-month price movement.
Gasoline Prices Fall Year Over Year
Gasoline prices dropped year over year for the second consecutive month in March 2023, with the largest yearly decline since July 2020 at 13.8%. The decline in gasoline prices was mainly driven by the steep price increases in March 2022 when gasoline rose 11.8% month-over-month due to supply uncertainty following Russia’s invasion of Ukraine. This increased crude oil prices, which pushed prices at the pump higher for Canadians.
The slowdown in Durable Goods Price Growth
On a year-over-year basis, price growth for durable goods slowed in March 2023 at 1.6%, compared to February 2023 at 3.4%. Furniture prices led to the deceleration in prices for durable goods, falling 0.3% year over year in March, following a 7.2% increase in February. The slowdown in durable goods price growth can be attributed to a decrease in demand as well as supply chain disruptions and delays.
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Rising Food Prices
Food prices continue to rise, with a year-over-year increase of 4.9% in March 2023, slightly lower than the 5.1% increase in February 2023. The increase in food prices can be attributed to a combination of factors, including supply chain disruptions, labor shortages, and transportation costs.
Housing Prices on the Rise
Housing prices continue to rise, with a year-over-year increase of 9.8% in March 2023, the largest increase since November 2022. This increase can be attributed to the strong demand for housing, fueled by low-interest rates and a shortage of available homes. The increase in housing prices is also reflected in the rise in mortgage interest costs, which saw a 13.5% year-over-year increase in March 2023.
Impact on Canadian Consumers
The rise in Consumer Price Index (CPI) has a significant impact on Canadian consumers, as it affects the cost of living and purchasing power. The increase in prices of goods and services means that Canadians will have to spend more to maintain their standard of living, especially in categories such as housing and food. The decrease in energy prices may provide some relief, but the overall trend of rising prices is a concern.
Impact on Businesses
The increase in Consumer Price Index (CPI) also has an impact on businesses, as it affects their costs and profitability. The rise in prices of inputs such as raw materials and labor can lead to higher production costs, which may be passed on to consumers in the form of higher prices. This can lead to a decrease in demand and sales for businesses, especially in categories such as durable goods.
The rise in Consumer Price Index (CPI) may have implications for monetary policy, as it may affect the Bank of Canada’s decision to raise or maintain interest rates. Higher interest rates can help to control inflation but can also hurt economic growth and consumer spending. The Bank of Canada will have to carefully consider the trade-offs between inflation and economic growth when making its policy decisions.
The March 2023 Consumer Price Index (CPI) report shows a significant decrease in year-over-year inflation, with the smallest increase since August 2021. The decrease in energy prices offset by an increase in mortgage interest costs contributed to the decrease in Consumer Price Index (CPI). However, excluding food and energy, prices were up 4.5% year-over-year, indicating a widespread increase in prices. The rise in housing and food prices has a significant impact on Canadian consumers and businesses, and the Bank of Canada will have to carefully consider the trade-offs between inflation and economic growth when making its policy decisions.