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Trevor Tombe Profile picture
@trevortombe
Jan 16 • 9 tweets • 4 min read • Read on X
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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
What was the main reason for the increase to 3.4% from the 3.1% in November? Energy prices. Here's a breakdown.

It's not that gasoline went up in December. It's that they fell more in Dec 2022 than in Dec 2023. Image
Here's a full summary of recent price changes over the past three months (annualized). Big pressures remain mainly within shelter.

Some have strong negative feelings about this graph. Well, it's as good as I can make it so here you go anyway ... :( Image
Interestingly, it looks like December is the first time in a while that we haven't seen an increase in mortgage interest costs contributing more to CPI than the month prior. The start of turning the corner for this item? Rates are a policy choice, so we'll see. Image
As for what the Bank will do, here's the key measures they look to. These strip out volatile components. Unfortunately, all started adding more over the past three-months than they did in November. Not great. 😳 Image
To end: as inflation returns to normal, it may be increasingly relevant to recognize people experience price changes differently depending on what they buy. I estimate the "personal inflation" rate varied in Dec 2023 from 2.6% (owners, no mortgage) to 3.7% (renters). #cdnecon Image
It's also worth noting (I make this point regularly) that even as inflation normalizes, price levels remain higher than they otherwise would have been. This makes the affordability challenge top of mind -- and may remain so for years if/until earnings catch up. Image

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More from @trevortombe

Trevor Tombe Profile picture
Nov 25
How do carbon taxes affect food prices? In our latest paper, @dr_jen_winter and I analyze both direct and indirect impacts across the entire food supply chain:

It's the most detailed exploration of CTaxes and food yet! 🤓 🧵 #cdnecon #cdnpoli papers.ssrn.com/sol3/papers.cf…Image
TL;DR: Carbon taxes in Canada, such as the federal $80/tonne emissions price, are often criticized for raising costs. But we find that emissions pricing increases domestic food costs modestly—about 0.8%—with imports shrinking the overall impact on food prices to about 0.5%.
The paper isn't yet accepted for publication, so comments are welcome! 😀 We've completed revisions for the Canadian Journal of Agricultural Economics and recently resubmitted. The link above is to the latest version.
Read 12 tweets
Trevor Tombe Profile picture
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
Trevor Tombe Profile picture
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
Trevor Tombe Profile picture
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
Trevor Tombe Profile picture
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
Trevor Tombe Profile picture
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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