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jadedragon
Administrator
Canada
3788 Posts |
 Posted - 07/23/2008 : 09:56:57
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By The Canadian Press
OTTAWA - Living in Canada got a lot more expensive last month as the accelerating price of gasoline and the first real emergence of food inflation pushed the rate of increase in Canada's consumer price index over three per cent for the first time in three years.
Statistics Canada said Wednesday the country's annual inflation rate jumped to 3.1 per cent in June from 2.2 per cent the previous month, the biggest one-month leap since September 2005.
As was the case more than three years ago when hurricanes Katrina and Rita caused a spike in oil prices, it was energy costs that fuelled inflation in June.
The cost of filling up at gasoline stations rose sharply by 26.9 per cent from a year earlier, adding to the previous month's 15 per cent increase.
If not for gasoline, Canada's annual inflation rate would have stood at a tepid 1.8 per cent in June, the agency said. As well, fuel oil and other fuels rose 49.3 per cent, the same pace as in May.
The core inflation rate, which excludes volatile items such as energy and fresh fruit and vegetables, remained steady at 1.5 per cent in June.
But as has been predicted for several months, food price inflation made an appearance, with store-bought food rising three per cent on an annual basis.
The chief culprit in the rise in food prices continued to be baked goods, up 12.3 per cent, but there also were price hikes for other items such as lettuce, milk and butter. Food inflation stood at 1.9 per cent in May.
Other items with significant price increases in June included mortgage costs, up nine per cent from a year earlier, home maintenance costs, up 3.2 per cent, and motor vehicle insurance, up 5.3 per cent.
The cost of flying rose by 14.3 per cent, the largest increase since May 2002, as airlines passed on the higher cost of fuel. Transatlantic flights posted the sharpest increase.
Not all things were more expensive in June, however.
The price of purchasing or leasing an automobile continued to fall, down 8.4 per cent from June 2007. As well, computer equipment and supplies were 13.2 per cent less expensive in June on an annual basis.
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“The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.” – George Bernard Shaw.
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horgad
1000+ Penny Miser Member
USA
1641 Posts |
Posted - 07/23/2008 : 11:45:48
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The US to Canadian exchange rate has been contained in a tight range between .98 and 1.02 for the last 8 months. This is very unusual given the current volatile nature of US dollar. During that 8 months the dollar has continued to fall against the Euro, the Swiss Franc, and the Chinese Yuan.
The range is so tight and has lasted so long, that I am starting to think that there was an agreement made by the Canadians to make an unofficial peg to the US dollar at 1 to 1. So every time the US dollar starts to fall the Canadians essentially buy US dollars and/or sell Canadian dollars to maintain the peg. The end result is that as long as Canada does this all of the US inflation becomes Canadian inflation as well.
The motive for doing this is to maintain the current business balance with the US. If the US dollar falls too much, imports/exports and jobs will all be affected. Short term this is perceived as bad for the Canadian economy.
Long term I think that "importing" US inflation will be much, much worse the economy. It would be far better to let the currency float to its natural value and let the economy adjust...I don't think the economy would be hurt that much, but rather things would shift around until a new equilibrium was found.
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Canadian Inflation Report - gas, food rise
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