April 28, 2008
Economy at a Glance - April 29, 2008
Energy prices +5.4% in Canada and +17.0% in the U.S.
Prepared by Alex Carrick - Chief Economist, CanaData
As of March 2008 results, both the “all-items” and “core” inflation rates in Canada have been on downward paths for about half a year or more. The U.S. all-items inflation rate has been stuck at 4.0% or slightly higher for the past five months. U.S. core inflation has exceeded 2.0% for the past seven months. Core inflation leaves out items (mainly food and energy) with high and uncontrollable (e.g., due to the weather or international geopolitics) price volatility from the Consumer Price Index (CPI).
Rising energy costs are having a much bigger impact in the U.S. than in Canada. The energy sub-index of the CPI in the U.S. was (+)17.0 year over year in March, but only (+)5.4% in Canada. Gasoline prices were (+)26.0% south of the border, but only (+)7.9% north of the border.
There has been one side benefit of higher gasoline prices. Automakers in both countries have lowered suggested retail prices and offered greater incentives to bolster their sales. Due to generally weaker numbers on the U.S. economy (e.g., actual job losses), motor vehicle sales have been faltering in the U.S., whereas they have maintained a relatively steady pace in Canada.
Among major sub-components of its CPI, Canada has rapid price inflation really only in one area and that’s shelter ((+)4.1%). Furthermore, it may seem like a strange thing to say, but that relatively high level of increase is actually good news. It arises from the fact that house prices are continuing to increase across the country. This is positive in terms of the “wealth effect” and consumer confidence. Falling house prices have seriously cut into consumer confidence in the U.S.
For more articles by Alex Carrick on the Canadian and U.S. economies, visit his blog and Market Insights.
Canada vs U.S. Inflation - Monthly
(CPI & CPI-U Not Seasonally Adjusted)
Canada vs U.S. Core Inflation - Monthly
(CPI CORE & CPI-U Less Food and Energy Not Seasonally Adjusted)
Data sources: Statistics Canada and U.S. Bureau of Labor Statistics (Department of Labor). Charts: Reed Construction Data - CanaData.
