It’s not just your imagination. Retail prices are up significantly, according to the latest measure of CPI inflation (total CPI) produced by Statistics Canada. In fact, the rate has tripled according to the latest data reported by the Bank of Canada. As at the end of April 2011, total CPI was a whopping 3.3%!
The Consumer Price Index (CPI) is used to estimate how the purchasing power of money changes over time. The CPI measures inflation by comparing the retail prices of a representative “shopping basket” of goods and services at two different points in time.
Here’s how this year’s figures compare to prior years: at the end of the second quarter of 2009, total CPI was 1.2 %. At the end of the same period in 2010, it was 1.4%.
How is that affecting Canadians? The many respondents of the Knowledge Bureau Poll in June concur that they are spending more, citing food and gas prices as main culprits.
Respondent Pat Harris says “We are seeing a huge decrease in discretionary spending as people struggle to pay for basic necessities such as food, electricity, heating fuel and gasoline. As people who live in rural Ontario with NO access to public transit, many are finding it difficult just to get to work.”
Over on the West Cost, Peter McG states: “Gasoline, fresh fruits & vegetables, meat and grains all significantly up in price. Government reaching into our pockets for ever more money. House prices are ridiculous (Vancouver)! Been to Dairy Queen lately? They want $5.00 for a Sundae and $3.00 for a simple Ice Cream Cone. Ridiculous. Really feel for young families who would like to buy a home to raise their family. Not even a dream for most!”
This bears out when you look at core inflation, the year-over-year growth in a variant of the CPI that excludes the eight most volatile components —which account for 19 per cent of the CPI basket—(fruit, vegetables, gasoline, fuel oil, natural gas, mortgage interest, intercity transportation, and tobacco products). That figure rates core inflation at only 1.6% at the end of April, while core inflation excluding food, energy and the effect of change in indirect taxes was only 1%.
It’s Your Money. Your Life. Now is the time to take a hard look at Real Wealth Management as a process to kill wealth eroders like taxes, inflation and investment fees. It’s not that difficult. You need to know some basic terms and work with a professional advisory team who knows your objectives and concerns to help you make decisions about your spending and savings.
Evelyn Jacks is President of the national financial education institute, Knowledge Bureau and best-selling author of 46 books on tax preparation, planning and wealth management, including Essential Tax Facts. Take a free trial of the Real Wealth Management course to think with focus on how to take better control.