More weight for gasoline, less for groceries as Canada retools inflation baskets

·1 min read
FILE PHOTO: A woman browses in the fruit section of a Loblaw supermarket in Collingwood

By Julie Gordon

OTTAWA (Reuters) - Changes to gasoline prices will count more toward Canada's inflation rate, but grocery price fluctuations will count less, following a regular reshuffle of consumer price index baskets released by Statistics Canada on Wednesday.

The new basket weights will be applied to May's inflation data, due on June 22, and are unlikely to have a major impact on the headline rate, which is widely expected to be higher than the 6.8% hit in April.

"It certainly does not seem like a game changer," said Doug Porter, chief economist at BMO Capital Markets. "And we suspect it will be a sidebar to the rollicking rises in things like energy and food next week."

The changes largely reflect how last year's reopening phase impacted spending, after the previous shuffle focused on shifts early in the pandemic, when people were at home more, spending less on gasoline and in restaurants.

But with energy now at its highest component rate since 2013 and gasoline prices hitting new record highs every month, there could be some pressure to the upside, said economists.

"At the margin, this could put some pressure on inflation numbers in the near term," said Jimmy Jean, chief economist at Desjardins Group.

Statscan regularly updates its baskets to ensure its inflation index "remains relevant to the changing consumption and expenditure patterns of Canadians."

The reweighting has historically had only a marginal impact on the headline number.

(Reporting by Julie Gordon in Ottawa; Editing by Chris Reese)

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting