Business Environment Profiles - Canada
Published: 27 January 2025
Consumer price index
158 Index
3.1 %
This index represents the consumer price index (CPI) for Canada, excluding the effect of indirect taxes. The index has a base year of 2002 and is sourced from Statistics Canada. The CPI can be considered one of the most important measures of inflation banks use to gauge the health of the economy. The central bank aims to keep inflation at a healthy rate around 2.0% year-over-year growth.
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The consumer price index (CPI) has grown steadily since at least 1984, usually between 1.0% and 3.0% annually. The 2009 recession broke this pattern, as prices only grew 0.3% over that year. The low rate of price growth stemmed from low consumer demand for goods during the year due to depressed consumer incomes. Price growth then accelerated over 2010 and 2011 to coincide with the gradual recovery of consumer incomes. The slow return of demand continued in 2012 as prices grew 1.3%. However, subdued job creation, combined with fears of a housing bubble, limited spending and price growth in 2013. As a result, the CPI only increased 1.0% over that year.
In 2015, the CPI grew 1.1%, driven by a rise in prices for some consumer products included in the CPI market basket. In 2016, the CPI grew 1.4%, driven by rising consumer prices. For example, the price of food, shelter, household operations and furnishings, clothing and footwear, as well as health and personal care, increased. Notably, all consumer item prices rose (data obtained by comparing May 2015 with May 2016), with the exception of transportation and energy-related prices. The rates of growth from 2015 to 2017 were considered low and below target for the central bank of Canada, which gave room for further cuts in the overnight rate during those years and only a small increase in 2017. Strong inflation growth in 2018 gave room for the central bank to increase rates in tandem with tightening monetary policy in the United States. In 2019, inflation has grown at a healthy pace albeit some fluctuations as a result of volatility in energy and gasoline prices. Moreover, strong consumer expenditure in the second quarter has coincided with a dip in business investment, which overall, has maintained prices stables, particularly of food and essential items.
Inflation slowed substantially in 2020 due to the onset of the COVID-19 pandemic, which drastically reduced economic activity and resulted in a high level of unemployment, both for Canada and its primary trading partner, the United States. As a result, growth in the consumer price was modest, growing only an estimated 1.2% in 2020. In 2021, however, rebounding consumer spending coupled with supply chain issues and shortages resulted in prices rising 2.8%. Continued supply chain issues accelerated the growth of inflation, causing the CPI raising 5.6% in 2022. While inflation was the primary concern in 2023, production capabilities eased the pressure on the prices of consumer items, while the Bank of Canada's monetary policy led to decreases in rates. However even as rate cuts are implemented during 2024 and 2025, CPI continues to increase, however at a slower rate, increasing 1.8% and 2.0% during each year.
The CPI will likely continue to increase moderately over the five years to 2030, growing at an an...
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