Canada CPI (Traditional Inflation)

Current Canada Inflation Rate: 1.89% (-39.4% vs last year)

Inflation rate based on 12-month change in CPI.

The CPI starts with a “basket” that represents typical consumer spending. This basket includes thousands of items grouped into major categories:

• Housing: about 20%
  
• Food and Beverages, restaurants: 18%
  
• Transportation: 15%
  
• Utilities/energy: 11%
  
• Medical Care: 12%
  
• Education and Communication: 6%
  
• Recreation: 5%
  
• Apparel: 3%
  
• Miscellaneous Goods and Services: 10%

The composition of the basket is updated periodically to reflect changing consumer preferences and habits.

Not all price changes are created equal. If a car model improves with better safety features or a smartphone gets upgraded with new tech, Statistics Canada adjusts for these quality improvements. This is a controversial practice.

The CPI isn’t just an academic figure. It’s a key metric influencing:

• Cost-of-Living Adjustments (COLAs): For Social Security and pensions.
  
• Wage Negotiations: Union contracts often tie raises to CPI.
  
• Economic Policy: Central banks use it to guide interest rates.

Issues with the CPI:

• Substitution Bias: If steak prices rise, consumers may switch to chicken, but CPI assumes they still buy steak.
  
• Exclusion of Asset Prices: CPI doesn't account for housing prices (only rent) or stock market changes, which significantly impact wealth.
  
• Some measures are based on surveys and not actual data.

Source:
• Statistics Canada