This video explains how and why the price change reported by the Consumer Price Index (CPI) may vary from the prices Canadians see on the shelves. It tells the story of Joe and Izzy, and how they each perceive price change as compared with the CPI. For more information about Canada's Consumer Price Index: http://ow.ly/XkJ4E
The Consumer Price Index, CPI for short, is one of the principal measures of inflation in Canada. It tracks the price change of goods and services for all consumers across the country.
Some have asked why the index doesn't appear to reflect their own consumer experiences. It may seem like the prices you see on grocery store shelves or at the pumps are not reflected in the CPI every month but, in fact, they are.
To see why, let's look at two Canadian consumers who are closely related but very different Izzy, and her eldest son, Joanasie.
Joe and his mom are close, but there's one issue that they just don't see eye to eye on: food. Joe always loved to eat meat, especially his mother's beef stroganoff. He loved it so much in fact, that Izzy grew tired of it and became a vegetarian when Joe left home.
During Joe's last visit, Izzy thought she might curb his carnivorous tendencies by making him one of her favourite veggie dishes: spinach tofu curry. It didn't work. Despite being a habitual plate-cleaner, Joe didn't even eat the tofu. As he prodded the little white cubes with his fork, he dreamt of steaks, roasts, and hamburgers.
Joe's choice of meat over tofu is one of the preferences that shape him as a consumer, and he is a very different consumer than his mom. Personal preference and taste as well as many other factors, such as household composition, lifestyle and mobility all have an influence on decisions that consumers make.
Since the CPI is an average measure of price change, it takes into account the big picture of consumer spending across Canada. It includes both Izzy's tofu and Joe's beef, as well as a massive list of other items that some Canadians buy frequently and others simply have no use for.
This big picture of consumer spending may not match with the experience of you or your household. This is because your experience of price change is limited to the relatively small list of things that you buy often. For example, for Joe's next visit, Izzy made another trip to the grocery store during which she unhappily noticed that her favorite tofu brand had increased in price by 50 cents.
Remembering Joe's last visit, she made note of a sale on pot roasts before she left the store. She figured she could make her beef stroganoff for Joe since he didn't seem thrilled with her veggie dishes. While the measly 50-cent increase in tofu had thrown Izzy for a loop, she didn't even notice that the price of beef had increased by a hearty 20% in the past year.
Most consumers, like Izzy, attach greater importance to price changes in goods and services that they buy frequently over more occasional purchases. However, the CPI measures price change in all goods and services. In doing so, we can draw an accurate picture of inflation and price change in the country. Changes in common items like milk or gasolineare included in the CPI of course, however, the index also includes items that are purchased less frequently, such as furniture, home electronics and clothing.
Joe, for example, hates shopping for clothing, but he did buy a new pair of jeans for his next visit to his mom's place - a pair with very deep pockets.
Visit the website for more information about Canada's Consumer Price Index.