Headline Deflation Number Not Worth Reporting

Media outlets have been reporting that inflation was -0.9% for the last 12 months in Canada. Many people will listen to that one number and not look any further.

The headline number includes food and energy prices with energy prices being the main reason for the decline since a barrel of oil in July 2008 was trading as high as $147 a barrel compared to $70 today.

As a result, gasoline prices dropped 28%. The decline in energy prices was quick and steep and will quickly disappear from the deflationary number being reported.

Core inflation which excludes these items was 1.8% and right in line with the 2% target of the Bank of Canada. There was nothing in this report to indicate a change in Bank of Canada interest rate policy.

Going forward, expect energy prices to contribute to the headline inflation number. Just like my post of a couple of weeks ago disecting the jobless numbers, it is always important to read more than the headline in order to say informed.

Your comments and inquiries are always appreciated.

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One Response

  1. I remember listening to CJAD radio in Montreal with advertising for Rothenberg & Associates (at least I think that was the name). You always impressed me with the your advertising of your company.

    Now that I am in Calgary, and retired, I would like one of the Rothenbergs, to contact me and see if you could help me with my modest portfolio.

    You will, no doubt, see that I am not a wealthy man. However, with your guidance, one newer knows.

    I would greatly appreciate your contacting me, so we can discusss my minor investments.

    Thank you for your consideration.

    Gary Tierney
    403-652-2246 (home)
    403-652-1365 (work)

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