Consumer Price Index: The benefits of the "shopping basket"
This guest blog post is provided by Statistics Canada who is responsible for producing statistics that help Canadians better understand their country — its population, resources, economy, society and culture.
Do you check the Consumer Price Index (CPI) on a monthly basis? If you don't, here are a few reasons why you should:
- It is the official measure of inflation used by the Bank of Canada in setting its monetary policy, thereby affecting interest rates and the ability of businesses and households to borrow money.
- It is used to escalate various contractual or legislated payments, such as wages, pension rates and old age security, to preserve purchasing power of the dollar.
- It can provide households with information to evaluate their financial situation.
- Businesses use the data as an indicator of the performance of the economy.
- It allows businesses serving consumers to compare price changes for products and services they sell with those in the broader economy.
These are just a few examples of the valuable information you can find in the monthly CPI releases.
You might wonder how the CPI is calculated. On a monthly basis, Statistics Canada tracks the retail prices of a representative "shopping basket". This "shopping basket" is made up of about 700 categories of goods and services purchased by households in Canada, including, but not limited to, food, housing, transportation, furniture, clothing, gas, hydro, recreation, and office supplies. The percentage of the total basket that any one item occupies is called its "weight", and is based on consumer spending patterns.
Now, you might be thinking: the mix of goods and services that you buy changes over time, so how can CPI data be representative? Statistics Canada understands that and observes the fluctuation of items in the "shopping basket", so from time to time, the "weight" of each item in the "shopping basket" is updated to best reflect consumer spending. Making these adjustments from time to time keeps the information you get in the monthly reports as relevant as possible.
So, why not make the CPI your go-to source to get a perspective on price fluctuations and market trends? Simply sign up at MyStatCan and reap the many benefits from the information that the CPI can offer you.
A video providing an overview of the Consumer Price Index (CPI) is available on Statistics Canada's YouTube channel.