It used to be said that a penny saved was a penny earned, but rising prices helped push out the penny years ago, and with inflation now running at well over seven per cent, it’s eating into every nickel and dime.
So while inflation is clearly happening, accurately capturing in a single number all the various price changes across the Canadian economy is much less straightforward.
There have been numerous method changes to make it more accurate since the government first started to track inflation in 1914 as war in Europe, record-high immigration and land speculation were driving up prices, but the data still attracts a fair amount of skepticism. The Bank of Canada relies so much on the data that it has periodically checked in to try and gauge for itself just how accurate the number is, and the most recent answer, going back close to a decade, is that CPI probably overstates inflation by about 0.5 per cent.
The list of more than 500 goods and services that Statistics Canada tracks stays fixed month to month so that there can be a clear comparison of products, said Taylor Mitchell, a senior economist at the federal agency.That includes correcting for product weights and quantities to account for any shrinkflation, she said.
Other sources of potential error can be trickier to fix, such as how much to account for changes in quality. Starting in May the agency did start to add them, but Holt pointed out that it is using JD Power data that showed used car prices up about 25 per cent in March from a year earlier, while Blackbook figured they were up 39 per cent. Statistics Canada also decided to use a wider age of car than the U.S., and gave them a smaller influence on the overall inflation number than the U.S.
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