Tuesday, December 20, 2005 Released at 7:00 a.m. Eastern time in The Daily

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November 2005

Consumer prices declined for a second consecutive month in November as the price of gasoline continued to decrease. The all-items Consumer Price Index fell 0.2% in November, after it declined 0.5% in October. The 12-month change in the index slipped to 2.0% from 2.6% in October.

The all-items index excluding energy was 1.4% higher in November compared to one year earlier, down from the 12-month increase of 1.5% in October. The 12-month change in the all-items index excluding the eight volatile components, as defined by the Bank of Canada, was also down at 1.6% in November, compared with the 12-month change of 1.7% in October.

Consumer prices climb more slowly on a 12-month basis

Consumer prices climbed more slowly on a 12-month basis due mostly to a drop in gasoline prices in November 2005. Gasoline prices increased on average 9.4% from November 2004 to November 2005, compared to an increase of 17.0% from October 2004 to October 2005.

Other major factors that pushed up the CPI were the cost of purchasing and leasing automotive vehicles, natural gas, homeowners' replacement cost and restaurant meals.

Lower prices for computer equipment and supplies, and for fresh vegetables exerted some downward pressure on the 12-month increase in the CPI.

Gasoline (+9.4%) exerted the strongest upward pressure on the 12-month change in the CPI. Price increases ranged from 6.0% in Nova Scotia and Newfoundland and Labrador to 12.7% in British Columbia.

Prices for the purchase and lease of automotive vehicles were up 2.7% from a year ago. Lower financial incentives offered by vehicle manufacturers on the new 2006 models helped to push up the index.

Natural gas prices rose 18.7% between November 2004 and November 2005. Almost 40% of this increase can be attributed to higher prices in Alberta (+34.4%). The Alberta government has a rebate program that normally runs from November 1st to March 31. This rebate is consumption based and is applied directly to consumers' bills. Quebec (+18.8%), Manitoba (+18.1%), British Columbia (+16.1%), Ontario (+13.5%) and Saskatchewan (+10.1%) also reported increases since November 2004.

Homeowners' replacement cost, which represents the worn out structural portion of housing and is estimated using new housing prices (excluding land), rose 5.1% compared to November 2004. The main factors in this increase were higher costs for labour and the transportation of materials.

Prices for restaurant meals have risen 2.8% since November 2004. There has been a steady increase in prices in this sector for several years. The last monthly decline was posted in December 1999. Twelve-month increases in prices ranged from 1.7% in Nova Scotia to 3.4% in British Columbia.

Several of the major components of the CPI posted 12-month increases. The housing (+3.2%) and transportation (+3.7%) indexes applied the greatest upward pressure on the All-items index.

To a lesser degree, upward pressure also came from the food (+1.4%), health and personal care (+2.4%), alcoholic beverages and tobacco products (+2.5%), and household operations and furnishings (+1.0%) indexes.

The clothing and footwear component declined 1.4% as a result of lower prices for women's, men's and children's clothing. The recreation, education and reading component edged down 0.2% due to lower prices for computer equipment and supplies, and for traveller accommodation.

The monthly CPI falls for a second month in a row

Between October and November this year, the CPI fell 0.2%, after falling 0.5% last month. Lower gasoline prices exerted most of the downward pressure. Higher prices for the purchase and lease of automobiles moderated November's decrease in the index.

Lower prices for traveller accommodation were the second strongest contributor to the monthly drop in the index, while higher prices for fresh vegetables offset its impact. Lower prices for women's clothing also played a moderating role on the index.

The CPI excluding energy rose 0.4% between October and November 2005. The increase resulted from the exclusion of gas prices from the index, as these failed to offset the rise in the price for the purchasing and leasing of automotive vehicles.

Gasoline prices fell an average of 11.2% in November, the result of lower wholesale prices and lower crude oil prices on the world market. Lower product demand and comfortable crude inventory levels were also responsible for lower prices across Canada. The largest decrease was observed in Prince Edward Island (-14.3%), while Yellowknife saw a drop of 5.1%.

Prices for purchasing and leasing automotive vehicles, which accounts for about 8% of the goods and services in the CPI basket, climbed 5.1% in November. The index reflects the prices for the 2006 models. In November of each year, models of automotive vehicles from the current year (2005) are replaced by new models (2006) in the CPI sample. When the old models are compared to the new models, only pure price changes are incorporated in the index, as the CPI compares goods and services of equivalent quality. As a result, price increases due to improved product quality are not captured in the index.

Prices for traveller accommodation plunged 11.0% in November. Lower prices are normal for November, as demand in most areas continues to drop from the summer's peak tourist season.

Prices for fresh vegetables generally increase in November. However, the 9.9% increase this year is weaker than the 18.8% last year. Higher prices for "other fresh vegetables" in Quebec (+17.3%) and in Ontario (+13.5%), especially for green peppers, cauliflower, celery and cucumbers, were the main contributors to these increases.

Consumers continued to take advantage of numerous discount sales in the women's clothing sector in November. Prices for women's clothing were down 4.0%. Reductions of this nature normally occur in November. Saskatchewan posted the largest drop (-7.4%), while Newfoundland-Labrador saw an increase of 3.4%.

The seasonally-adjusted CPI edges down 0.2% from October to November

Seasonally adjusted, the CPI was down 0.2% between October and November 2005.

Downward pressure came from transportation (-0.7%), clothing and footwear (-0.9%) and food (-0.2%). Indexes for household spending and equipment (+0.3%), housing (+0.1%), alcoholic beverages and tobacco products (+0.3%) and health and personal care (+0.2%) exerted upward pressure on the seasonally adjusted All-items CPI.

The seasonally adjusted index for recreation, education and reading did not contribute to the change in the seasonally adjusted CPI.

All-items index excluding the eight volatile components

The All-items index excluding the eight volatile components, as defined by the Bank of Canada, increased by 1.6% between November 2004 and November 2005. The main contributors to this increase were prices for the purchase and leasing of automotive vehicles (+2.7%), homeowners' replacement cost (+5.0%), restaurant meals (+2.8%), and property taxes (+3.2%). The increase was offset by lower prices for computer equipment and supplies (-15.6%), traveller accommodation (-5.8%) and insurance premiums for automotive vehicles (-1.2%).

Between October and November, the All-items index excluding the eight volatile components, as defined by the Bank of Canada, rose by 0.4%. The main factor behind the upward pressure was the higher cost of purchasing and leasing automotive vehicles (+5.2%), while most of the downward pressure came from the drop in the cost of traveller accommodation (-11.0%) and the prices of women's clothing (-4.0%).

Energy

After jumping 13.5% between October 2004 and October 2005, the energy index climbed 8.8% between November 2004 and November 2005.

Higher gasoline prices (+9.4%) were the main contributor to the increase, although prices for natural gas (+18.7%), fuel oil (+18.0%) and electricity (+2.3%) were also factors.

On a monthly basis, the energy index was down 6.1% largely under the influence of lower prices for gasoline (-11.2%), fuel oil (-3.5%) and electricity (-0.2%). The decrease was moderated by higher prices for natural gas (+1.2%).

Available on CANSIM: tables 326-0001, 326-0002, 326-0009, 326-0012 and 326-0016 to 326-0018.

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).

Available at 7 a.m. online under Today's news releases from The Daily, then Latest Consumer Price Index.

The November issue of the Consumer Price Index, Vol. 84, no 11 (62-001-XIB, $9/$83; 62-001-XPB, $12/$111) is now available.

The December Consumer Price Index will be released on January 18, 2006.

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