Consumer prices increased 2.5% between November 2006 and November 2007

Fuelled by higher gasoline prices and mortgage interest cost, consumer prices increased 2.5% between November 2006 and November 2007, a slight acceleration from the 12-month change of 2.4% posted in October.

However, the Bank of Canada's core index, used to monitor the inflation control target, rose only 1.6%, posting its slowest 12-month increase since April 2006.

The core index has decelerated since July 2007. The 12-month change was 2.2% in August, 2.0% in September and 1.8% in October.

The gap between the rate of growth in the all-items Consumer Price Index (CPI) and the core index is attributable to gasoline and mortgage interest cost, two components that pushed up the all-items CPI but which are not accounted for in the core measure.

Gasoline prices were 17.6% higher in November 2007 compared with the same month in 2006. This growth was partially due to a drop in prices around this time in 2006 and a 4.0% increase in gasoline prices between October and November 2007. The monthly increase partially reflects the higher price of crude oil on the global market.

Consumer prices rose 0.3% between October and November 2007 after declining 0.3% during the previous month. This reversal was due mainly to movements in gasoline prices, which increased 4.0% between October and November following a 3.3% decline during the previous month.

The core index remained unchanged between October and November following a 0.2% decline posted in October.

Twelve-month change: Large increase in gasoline prices

November's 12-month change of 2.5% in the all-items CPI was higher than the 2.1% average 12-month increase since the beginning of 2007.

November's growth rate was mainly driven by a 17.6% increase in the price of gasoline in November 2007 compared with November 2006. This was the most significant annual growth recorded since May 2006, when gasoline prices rose 18.6%.

Gasoline has been the dominant factor in the annual growth in the all-items index since September. This growth was partially due to a drop in prices around this time in 2006 as well as a 4.0% increase in gasoline prices between October and November 2007. The month-to-month increase partly reflects the higher price of crude oil on the global market.

Other factors contributing to the 12-month increase in the all-items index in November included mortgage interest cost, homeowners' replacement cost and restaurant meals.

Costs associated with owned accommodation (+5.1%) once again played an important role in the rise of the all-items index over the 12 months preceding November 2007. The two main components of the owned accommodation index are the cost of financing the purchase of a house (mortgage interest cost index) and the cost of maintaining the housing structure from wear and tear (homeowner's replacement cost index).

The mortgage interest cost index advanced 7.0% during this period, up from the 6.7% growth posted in October. The 4.9% annual increase in homeowners' replacement cost also contributed to the rise in costs for owned accommodation. The pace of growth of this component continued to slow down in line with changes in new housing prices.

Canadians paid 2.4% more for restaurant meals in November compared with November 2006. Although this item is a major contributor to the growth in consumer prices, the increase was the most moderate since June 2007.

Among the factors dampening the 12-month increase in consumer prices were declines in prices for vehicle purchase and leasing, fresh vegetables and fruits and computer equipment.

The main factor was a 3.9% drop in the price to purchase and lease vehicles. November was marked by the introduction of 2008 models and the fact that manufacturers continued to offer rebates on many new 2008 models. This was the largest 12-month decrease on record.

Prices for fresh vegetables fell 11.1% on the heels of a 14.6% drop posted in October. Canadians also enjoyed a 6.2% decline in prices for fresh fruits, mainly thanks to lower prices for oranges.

Prices for computer equipment and supplies declined 14.9% in November in the wake of lower prices for desktops and laptops.

Provinces: Consumer price growth cools in Alberta

Between November 2006 and November 2007, consumer prices increased at rates faster than the national average in five provinces: Prince Edward Island (+2.9%), Nova Scotia (+2.8%), New Brunswick (+3.2%), Saskatchewan (+4.0%) and Alberta (+4.7%).

Gasoline prices were the main contributor to CPI growth in all provinces except Saskatchewan and Alberta, where they were second to owned accommodation costs.

The year-over-year growth in the price of gasoline accelerated in November in all provinces. The increase was especially steep in Nova Scotia, where it reached 19.6% in November compared with 12.2% in October.

The growth in consumer prices slowed in Alberta, where the 12-month increase in November was 4.7% compared with 5.0% in October. This was due mainly to natural gas prices, which fell 3.2% in November after increasing 16.0% in October.

Monthly change: Gasoline reverses change in the all-items index

Consumer prices were up 0.3% between October and November 2007 following a 0.3% decline the previous month. This reversal stems mainly from changes in gasoline prices (+4.0%).

A 0.8% increase in mortgage interest cost also contributed to growth in the all-items index. This component has continued to grow at a monthly rate between 0.7% and 0.8% since July 2007. Mortgage loan renewals at higher rates contributed to the growth in this component almost as much as increasing new housing prices.

The price of bakery products increased by 3.8% as world wheat prices held at record levels. Canadians paid 4.5% more for their fresh vegetables in November compared with October.

With the onset of winter, the price of fuel oil and other fuels grew by 4.7%, the steepest rise of this component since September 2005, when Hurricane Katrina affected the petroleum industry.

The impact of these increases was partly offset by traveller accommodation prices, which fell 5.5%, and the price of electricity, which was down 1.6%. The decline in electricity prices occurred mainly in Ontario, where the winter rate schedule took effect on November 1. Ontario residents enjoyed a lower rate on their first 1 000 kWh/month of consumption, whereas this lower rate applied to the first 600 kWh/month in October.

Natural gas prices fell 2.9% as mild weather contributed to low demand and stocks were high. Prices of women's clothing were down 1.3% as retailers began discounting winter apparel.

Available on CANSIM: tables 326-0009, 326-0012, 326-0015 and 326-0020 to 326-0022.

Definitions, data sources and methods: survey number 2301.

More information about the concepts and use of the CPI are also available online in Your Guide to the Consumer Price Index (62-557-XIB, free), now available from the Publications module of our website.

The November 2007 issue of the Consumer Price Index, Vol. 86, no. 11 (62-001-XWE, free), is now available from the Publications module of our website. A paper copy is also available (62-001-XPE, $12/$111). A more detailed analysis of the CPI is available in this publication.

The December 2007 Consumer Price Index will be released on January 25, 2008.

For more information or to enquire about the concepts, methods or data quality of this release, call Client Services (toll-free               1-866-230-2248       ;               613-951-9606       ; fax 613-951-1539; prices-prix@statcan.ca), Prices Division.