Canada’s latest CPI basket shows higher housing weight Reuters

TORONTO (Reuters)-The National Bureau of Statistics of Canada on Wednesday announced a new weight for a package of goods and services in the Consumer Price Index (CPI). As housing prices soared, the weight for housing has increased.

Statistics Canada stated that the updated basket weights represent consumer spending patterns during the 2020 coronavirus pandemic and will be included in the June 2021 CPI. June data will be released on July 28.

CPI provides insight into inflation and is sometimes used to help determine wage growth. It also has an impact on the actual return of bonds, which can compensate investors for the impact of changes in the index.

Statscan has created an alternative index to better reflect the impact of changes in spending caused by the pandemic, and it has been tracking higher than official inflation rates.

The previous shopping basket update is based on the 2017 purchase model.

According to the statistical agency, three of the eight main components have seen unprecedented growth in the weight of the basket. Housing is the main component with the highest weight, and its share of the basket has increased from 26.92% in 2017 to 29.78%.

During the pandemic, Canadian house prices soared.

The share of household business, furniture and equipment increased to 15.21%, and alcoholic beverages, tobacco products and recreational marijuana increased by 4.86%.

The basket share of the four main components fell, with the transportation component falling the most. It dropped from 19.72% to 15.34%.

The updated weights utilize alternative data sources to help explain changes in consumer spending related to the pandemic.

Canada’s annual inflation rate accelerated to 3.6% in May, the fastest rate in a decade, partly due to a statistical comparison with last year’s price decline.

The Bank of Canada’s inflation target is 2%, and the control range is 1%-3%. It expects that the inflation rate will fall back to its target of 2% by 2022.

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