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  • Nov 15th, 2017 1:13 pm
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[OP]
Newbie
Oct 29, 2017
26 posts
1 upvote

Rate of inflation

Is there a way for me to find out what the rate of inflation in Canada was over the past 1, 3, 5, 10 and 20 years?
9 replies
Newbie
Nov 13, 2017
1 posts
1 upvote
Not the real one. You can see the imaginary rate of inflation that government bureaucrats made up that somehow is 1% even though housing has doubled in the last 6 years.
Sr. Member
Nov 13, 2013
714 posts
244 upvotes
OTTAWA
timc00k wrote:
Nov 14th, 2017 10:55 pm
Thank you for this link from a reliable source.

I always thought inflation ran at 3% per year over the long term, but between 1987 and 2017, inflation was 2.15% per year. Does that sound about right?
It is correct according to CPI. There is no reason for inflation to average 3%. Bank of Canada's goal is 2% (1-3% range). Long term lots of countries have much higher rates. Japan probably has below 1% over the 1987-2017 period.

A lot of people claim the CPI underestimates inflation. Either accidentally or by design. Keep in mind the technology effect makes it seem like your spending rate is increasing faster than inflation. For example in 1980 the typical family might spend $300 for a TV. Now we might spend $2000 but that 1980 TV is for sale for $50 at Walmart so inflation wise the cost of a TV has actually dropped. The family budget needs (or wants really) to spend more on a TV.
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Mar 9, 2012
839 posts
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KITCHENER
timc00k wrote:
Nov 14th, 2017 10:55 pm
Thank you for this link from a reliable source.

I always thought inflation ran at 3% per year over the long term, but between 1987 and 2017, inflation was 2.15% per year. Does that sound about right?
Generally it is fairly accurate. Some things inflate more, some things less. I think inflation control started to come more into fashion after 1982 or so and has steadily dropped. The past 10 years is a little over 1.5%. --- If you looked at 1972 to 1982 it was closer to 10%.
Newbie
Jul 3, 2017
70 posts
19 upvotes
The government inflation rate excludes some important things, although they do try to revise what's included once in a while to keep up with changing times. It's really impossible to come up with a single rate that reflects everybody's perception. For example 20 years ago nobody had internet or cell phone services. Now they are a major factor for most of us, but not everybody has them. In many rural regions they aren't even available. Transportation changes over time too - cars get more fuel-efficient, people switch to electric cars or start using transit more when a new rail system becomes available, so should the price of gas still count as much? If one source of food gets too expensive, people drop it from their diets. Housing in big cities like Toronto and Vancouver has gone through bursts of inflation to reach levels higher than the average worker can afford - but as a result those people find other alternatives like renting, moving to outlying suburbs and using transit, or moving to smaller cities. So how should you count housing in the inflation index?
[OP]
Newbie
Oct 29, 2017
26 posts
1 upvote
fogetmylogin wrote:
Nov 15th, 2017 1:31 am
It is correct according to CPI. There is no reason for inflation to average 3%. Bank of Canada's goal is 2% (1-3% range). Long term lots of countries have much higher rates. Japan probably has below 1% over the 1987-2017 period.

A lot of people claim the CPI underestimates inflation. Either accidentally or by design. Keep in mind the technology effect makes it seem like your spending rate is increasing faster than inflation. For example in 1980 the typical family might spend $300 for a TV. Now we might spend $2000 but that 1980 TV is for sale for $50 at Walmart so inflation wise the cost of a TV has actually dropped. The family budget needs (or wants really) to spend more on a TV.
If people claim that CPI underestimates inflation, is there a third party website that anyone knows off that also runs the numbers as a check on the governement?
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Nov 25, 2014
1340 posts
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Newton Brook, ON
timc00k wrote:
Nov 15th, 2017 10:52 am
If people claim that CPI underestimates inflation, is there a third party website that anyone knows off that also runs the numbers as a check on the governement?
If people claim Statistics Canada's numbers are false, I don't know what we can do for them. But if the concern is that certain items are missing from the CPI like housing, then you can look at the Survey of Household Spending instead:

http://www.statcan.gc.ca/daily-quotidie ... 7a-eng.htm

Based on this information, the average rate was about 2.2% from 2011-2015:

http://www5.statcan.gc.ca/cansim/a26?la ... ern=&csid=

If you click "Add/Remove data", under Step 3 you can scroll down to Shelter > Owned living quarters and select "Mortgage paid for owned living quarters". This shot up by 11.5% from 2012-2013, but that still only represents 0.7% of the total.
You need someone with an umbrella not a fork
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Feb 26, 2008
1482 posts
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timc00k wrote:
Nov 15th, 2017 10:52 am
If people claim that CPI underestimates inflation, is there a third party website that anyone knows off that also runs the numbers as a check on the governement?

Well, CPI is thought to overestimate true inflation because it is a Laspeyres price index with a fixed basket of goods. What that means is that there is no attempt to take into account that people will substitute away from goods that go up in price and instead buy other products that haven't gone up as much. The best example of this was around Christmas of 2015 when the price of cauliflower spiked, eventually hitting about $5/head. A Laspeyres price index assumes that we all just keep buying cauliflower, business as usual. However, we all know that's not true. Nobody in their right mind pays $5/head for cauliflower when you can easily substitute to something else, like brussel sprouts or tomatoes. By being unable to account for substitution, CPI tends to be slightly overstated.

Working from memory, the other key way that CPI is overstated in Canada is that statcan does not attempt to make hedonic adjustments to reflect the changing quality of a product. As time goes one, many products register drastic improvements in quality, including cars, computers, telecommunications, bicycles, you name it. Statcan tracks the price that you pay for those items and calculates an index, but they don't adjust the prices to reflect the drastic improvement in quality. As an example, the average TV that someone might buy could cost say $800 and it's probably 60" and HD. Five years ago, the average TV probably also cost $800, but you only got maybe 40" 720. So on paper, the price of TVs is flat, but comparing apples to apples, true prices have plunged.

Overall, I'd say that statcan does a pretty decent job of tracking inflation, but nobody should expect that CPI will reflect their particular individual circumstances.

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