Trevor Tombe Profile picture
Sep 15, 2021 7 tweets 3 min read Read on X
Today's data: inflation! 📈 www150.statcan.gc.ca/n1/daily-quoti…

CPI up 4.1% in August compared to last year. Highest since 2003. Excluding food/energy (which are highly volatile), prices up 3%. #cdnecon
Important to remember, though, that much of the higher inflation we've seen in recent months is in part due to drops during COVID and prices returning to trend today means above-average inflation since last year's levels are lower.

Here's an illustration of that.
Also important to remember that the central bank looks to several measures to understand inflation pressures. Here are three of their main metrics. One exceeds the target range, the two others still don't.
Due to #Elxn44, some will take today's data and pull the fire alarm. This is premature. If one has a concern about monetary policy (that is, a target 1-3 range with BoC charged with independently achieving it) then say so. Ignore those who don't take monetary policy seriously.
What does the market currently expect inflation in Canada to be over the long-run? Comparing inflation protected government bonds to normal ones is a useful measure.

Here's the latest: expectations of ~1.7%. Markets (sensibly) don't expect today's elevated rates to persist.
I should have flagged this earlier, but here's another important way to understand recent price moves. Large increase in accommodation prices. But you can see here it's from a very low base. Year-over-year comparisons are denoted with dots. www150.statcan.gc.ca/n1/daily-quoti…
Is there a way to avoid the weird COVID year? Some look to the comparison of today vs two years ago (annualized). Here's a measure of that. Inflation in this way, which avoids weird COVID base effects, is right on target around 2%.

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More from @trevortombe

May 21
Today's data: inflation rate falls to 2.7% in April. Would have fallen more, but gasoline pushed the rate up. Shelter remains largest contributor, but pace of increase is falling.

#cdnecon #cdnpoli www150.statcan.gc.ca/n1/daily-quoti…
Image
The key Bank of Canada core measures of inflation have also remained within the target range -- lower than 2% -- over the past 3 months. This is what the bank is looking forward before lowering rates. Image
Here are the contributors to the drop. Most items down, but energy prices offset some of that.

This accounts for *changes* in the CPI annual rate of increase. Alternatively, had energy prices remained flat yoy, then CPI growth would have been 2.4% in April. Image
Read 4 tweets
Feb 20
Today's data: inflation! 🥳 Prices were 2.9%, on average, higher in January than a year earlier. Inflation down from 3.4% in Dec. Biggest contributors to the drop were energy, food, travel. Cell phones offsetting some.



#cdnecon #cdnpoli www150.statcan.gc.ca/n1/daily-quoti…
Image
Looking at the headline rate, shelter is larger contributor. Rent accounts for ~0.5 points of the 2.9, mortgage interest costs ~1.0 points.

Important: note the strong decline in the pace of grocery price growth. Now in line with historical norm. Image
The decline in inflation has also been fairly broad based, with now fewer than half of items seeing a pace of price growth above 3% -- although still a larger share than normal, which is ~0.3-0.4. Image
Read 7 tweets
Jan 16
Today's data: inflation!! 📈 Consumer prices were 3.4% higher in December than one year earlier. That's up from 3.1% in November.

I'll explore some of what's going on. #cdnecon #cdnpoli 🧵 www150.statcan.gc.ca/n1/daily-quoti…
Image
This is higher than last month, true, but it doesn't mean the inflation situation is worsening. I noted this yesterday, saying 3.4% was the number to watch.
This is a *very* important point to keep in mind for the next *several* months. Even if things are completely normal month-by-month, the headline rate won't fall much over the next quarter. Image
Read 9 tweets
Nov 21, 2023
As expected, inflation fell in October. A lot. From 3.8% in September to 3.1% in October. And monthly, adjusted for seasonality, prices were lower in October than Sept.

I'll unpack some more patterns here 🧵 #cdnecon #cdnpoli www150.statcan.gc.ca/n1/daily-quoti…
Image
A big part of the reason is from lower gasoline prices. That's anticipated because oil prices were down. There's a tight connection between energy's contribution to CPI and oil prices (obviously). This has been a consistent story over the past two years. Image
You can see the size of the contribution from energy to the change in inflation since September here 👇 . Basically everything else was a net wash. Image
Read 11 tweets
Nov 11, 2023
Some Alberta Pension Plan proponents are concerned about Albertans paying more in contributions than they receive in benefits. Is this "overcontribution" legitimate? If so, does it imply the CPP is unfair? Would an APP solve it?

Allow me to explain. 🧵🤓 #cdnpoli #ableg #cdnecon
The Government of Alberta regularly cites $60 billion in excess contributions over what has been received in benefits. The report commissioned by the government includes this figure. Red is Alberta. Positive means contributions > benefits. 👇 Image
The data are accurate. You don't even need an actuary. Statistics Canada reports this annually. Total contributions from 1966-2021 amount to approximately $60 billion. Adjusting for inflation provides a clearer perspective. Image
Read 14 tweets
Nov 4, 2023
To better understand this claim, consider an equally true but misleading statement: eliminating the GST would "reduce inflation by 61%"! 😲

Does that mean the GST is inflationary? What about the carbon tax?

I'll try to clarify things 🧵 🤓 #cdnecon #cdnpoli
The GST adds 5% to the cost of purchasing a good or service subject to this tax. Not all items are subject to it, though. I (roughly) estimate that, overall, the GST adds an average of 2.3% for consumer expenditures as a whole. (From here: )www150.statcan.gc.ca/t1/tbl1/en/tv.…
So, eliminating the GST would drop the CPI by 2.3%. Since the latest inflation reading is 3.8%, that would leave us at 1.5% (assuming nothing else changed). And 1.5% is 61% lower than 3.8%.

Simple. But not helpful or informative.
Read 10 tweets

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