If official numbers say inflation is virtually zero, why do so many of us feel otherwise?
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“The pandemic has gripped Canada’s economy hard, limiting demand and holding total inflation pressures low,” Arlene Kish, director of Canadian economics at IHS Markit Ltd., said in a note. “A second-wave risk, which some provinces are expecting, and social distance restrictions will keep inflation low in the near term.”
It’s become clear, however, that a significant portion of the public don’t agree with Bay Street’s view.
Carolyn Wilkins, the central bank’s senior deputy governor, acknowledged in a speech on Aug. 26 that “many people feel that inflation is higher than reported” and committed to “dig in more” on the reasons for the disconnect.
Statistics Canada has also heard the complaints. “The CPI, conceptually, is not the easiest measure,” Greg Peterson, the agency’s assistant chief statistician, said in an interview on Sept. 14. “Take a dozen eggs. If I was talking about the CPI for eggs in July as 169.7, that’s not a meaningful number to a lot of people.”
The agency’s approach to inflation is rooted in price theory and follows international norms agreed upon by statistical experts. Still, Peterson conceded, Statistics Canada could “better contextualize the numbers.”
The latest CPI report included a link to a graphic that attempts to explain how experts adjust for changes in quality. For example, when a fancy coffee shop starts serving smaller cups at the same price (CPI goes up), or when your internet company offers faster downloads without changing the price of a bundle (CPI goes down).
