Statistics Canada is developing an adjusted Consumer Price Index (CPI) to take into account Canadians’ altered spending habits during the COVID-19 pandemic, and the latest results show that a resumption to “normal” – while happening – is taking place very slowly.
According to a StatsCan daily report released Thursday, the federal agency said the adjusted CPI takes into COVID into account by adjusting the weights the index puts on various goods and services that have been impacted by pandemic consumer purchasing patterns since March.
“By the end of August, many businesses had resumed operations and although some consumer spending patterns began returning to pre-pandemic form, many remained altered,” the report said. “Shifts in household purchasing patterns have implications for the basket weights used to measure consumer price inflation. A fixed-basket price index, such as the official CPI, can only reflect such changes when basket weights are updated.”
The adjusted CPI shows that inflation is happening at a slightly more elevated rate than what’s shown in the normal CPI – up 0.4% in both July and August versus 0.1% in the unadjusted number. It shows, officials say, that the quest to reach a new normal is continuing.
“In July, the monthly adjusted consumer expenditure basket weights were more closely aligned with the 2017 basket weights for the official CPI compared with any month since the initial peak in April of the COVID-19 pandemic, as economic activity resumed in many sectors,” the report said. “However, despite a return to near pre-pandemic expenditure patterns for some components, others remained different.”
According to the report, the largest contributor to the discrepancy between the adjusted and the unadjusted CPI is the index for spending on air travel. Officials said that – given that airlines were offering deep discounts, incentives and other promotions to entice reluctant travellers to fly – the adjusted CPI gave less weight to spending on that front to mitigate the irregular pricing behaviour taking place.
Another sector that saw its weight in the adjusted CPI reduced is the passenger-vehicle market, where the reduced number of Canadians buying cars throughout the pandemic (when compared to previous years) weighed heavier on the original CPI than the new, adjusted index. Reductions in weight in the adjusted CPI also affected sectors such as travel tours, gasoline and traveller accommodation.
Meanwhile, with more people reporting purchases of home furnishings to accommodate working from home, the adjusted CPI has given much more weight to sectors like household services, financial services, owned accommodation expenses and rent. Another item weighed heavier in the adjusted index – meat – accounts for the new CPI being tepid in its growth rate, given the price decline in that sector in July and August.
Ultimately, the annual averages in changes through August for both the original CPI and the adjusted index were not that different – 1.2% for adjusted, 1.1% for the original (and still official) CPI.
