Consumer sentiment colliding with core inflation data?
By Chris Day
Statistics Canada says inflation in Canada dropped in September. Did you feel it? Unless your income rose by almost 4% since last September, likely not. You’re likely still falling behind when it comes to purchasing power.
StatsCan’s main measure of inflation, the consumer price index (the CPI), fell to 3.8% from 4% in August.
The CPI includes eight major components that eat up monthly household budgets:
Food
Shelter
Household operations, furnishings and equipment
Clothing and footwear
Transportation
Health and personal care
Recreation, education and reading, and
Alcoholic beverages, tobacco products and recreational cannabis
Food inflation has been particularly ‘sticky.’
Grocery prices have garnered lots of headlines and attention in recent months as food prices became a
political hot potato.
In September, food inflation decreased to 5.9% from 6.8% in August.
The delta between the food inflation rate and the CPI narrowed to 2.1% from 2.8%. That’s the smallest
spread between food inflation and the CPI since July 2022. But, since everyone needs to eat, the higher-than-core-rate of food inflation remains a key point of concern – for policy-makers and consumers alike.
Not sure about you, but I’ve noticed more a few specials on some of the things we buy for our house of
late. And some of the ridiculous prices seen earlier this year (ahem, 14-dollar watermelons) seem to
have fallen out of the stratosphere.
Interestingly, though, I’ve not noticed the savings in areas StatsCan’s monthly report showed declines.
For instance:
Coffee was apparently lower in September than in August by 2.6%.
Potato prices were apparently down 5.1% from the previous month.
Tomatoes (-1.0%), oranges (-5.0%), flour (-3.1%), bread (-0.9%), butter (-3.8%), and breakfast cereal (-
3.8%) also registered declines, again as tracked by StatsCan.
These were all surprises to me. Certainly, I’ve not noticed pullbacks in any of those areas. Guessing I’m
not alone in that.
Reading the tea leaves, the apparent disconnect between consumer sentiment and experiences and raw
statistical data will likely feed our political discourse over cost-of-living and affordability over the coming
months.
After years of punishing, generationally high inflation, do facts like the ones above carry the weight they
once might have? We are in a tricky era where what people feel is more important than what empirical evidence may suggest.
Cost of living concerns – including rising bills for the basics – are fueling intense discontent with the
federal government’s fiscal plan and economic policies and central bankers’ rate-setting battles to bring
inflation back to target levels (2-3% yearly).
These are big, complex topics. Solutions aren’t easy. And, for the typical family, the pain of declining
purchasing power and increasing prices is very real.
That’s precisely why the average heads of household put more stock on their pocketbook realities than
an economist’s assurance that things are getting marginally better. If they don’t feel it, it simply isn’t
real.
For federal policymakers, it’s looking increasingly like a fall and winter of consumer discontent even with
inflation trending down.