Comments on: Canadian Inflation Is About To Get A Boost Due To A Base Effect: BMO

By: Alissa

Alissa — Tue, 08 Aug 2023 11:11:58 +0000

In reply to Andi V.. No. That's not what is being said here. Your confirmation bias is showing. It's literally just Gas companies wanting more money.

By: Jim

Jim — Mon, 07 Aug 2023 11:45:05 +0000

In reply to Jon Morbey. and the moral hazard continues...

By: Jim

Jim — Mon, 07 Aug 2023 11:35:59 +0000

In reply to Jon Morbey. and the moral hazard continues...

By: Andrew Baldwin

Andrew Baldwin — Sun, 06 Aug 2023 15:11:36 +0000

While the so-called base effects, which are actually more appropriately called exit effects, are often invoked, they are virtually never precisely defined or measured. However, it is straightforward to do so. To measure the difference between 12-month CPI inflation rates for June 2023 and May 2023, the exit effect is simply the inflation rate for the 11-month period June 2022 to May 2023 less the 12-month inflation rate for May 2023. The entry effect is the residual, but can also be directly calculated as the 12-month inflation rate for June 2023 less the inflation rate for the 11-month period June 2022 to May 2023. The exit effect for June 2023 is -0.68%, and so very much dominates the difference between June 2023 and May 2023 12-month inflation rates, which is -0.55%. The entry effect is just 0.13%.
I am not sure why my previous comment was removed, since it was informative and did not violate any of the stated guidelines.

By: Andrew Baldwin

Andrew Baldwin — Sat, 05 Aug 2023 14:51:13 +0000

The phrase “base effect” is a garbage term that seems to have been first used by Statistics Canada in its October 2002 CPI update.
There was a big drop in energy prices in October 2001, the month following the 9/11 terrorist atrocities, enough to bring the October 2011 month-to-month inflation rate show a decrease of 0.5%. When this dropped out of the annual inflation rate in October 2002, it shot up from 2.3% in September to 3.2% in October. This should have been called an exit effect, but for some reason StatCan chose to call it a base effect, concentrating on the October 2002 inflation rate being calculated on a lower October 2001 base than the September 2002 base, when this was just an artifact of the exceptional October 2001 monthly inflation rate. The phoniness of this terminology is immediately obvious if you think that there would have been an even stronger jump in inflation if October prices usually rose by 10% but in October 2001 had not moved at all. Then the big exit effect pushing inflation up would have been accompanied by no change in the base at all. For some reason this trashy term has metastasized all over the world since then, as far away as India.
In the context of Canadian inflation, the immediate concern is with the CPI All-items and the vagueness of the post is unhelpful. The 12-month inflation rate that the Bank of Canada targets is based on the product of 12 monthly inflation ratios. When there is a new monthly update, the earliest monthly inflation ratio of the previous annual inflation rate exits the 12-month inflation rate and the monthly inflation ratio for the current month takes its place. In June 2022, there was a monster exit effect in operation as a June 2022 monthly ratio of roughly 1.007 (equivalent to an annualized inflation rate of 8.2%) left the annual inflation rate, to be replaced by a much lower monthly inflation rate for June 2023 of about 1.001 (equivalent to an annualized inflation rate of just 1.5%). So it is fair to note that for the next three months we will have exit effects that will likely tend to boost the annual inflation rate: for July 2022, August 2002 and September 2002, the annualized inflation rates are 1.6%, -3.8% and 0.8% respectively. However, after that, there is another monster positive exit effect, as the October 2022 annualized inflation rate is 9.0%.
It is worth mentioning that the exit effect is compounded if the product of the monthly ratios that remain part of the annual inflation rate from one month to another exhibit a high inflation rate. This is the case for June 2023, since the product of the monthly ratios for the 11-month period from June 2022 to May 2023 is 1.0268, equivalent to an annualized inflation rate of a little more than 2.9%.

By: Kathy

Kathy — Fri, 04 Aug 2023 16:46:32 +0000

In reply to Jackie. How much did childcare expenses reduce the CPI, because in reality I didn't notice any reduction for my expenses.

By: Omar

Omar — Thu, 03 Aug 2023 20:22:26 +0000

In reply to Frank. OPEC reduced output because half the world is getting discount oil from Russia, and aren't joining Western sanctions. A surplus to the East isn't a West, but we'll struggle to make sense since most of us still don't get what's happening.

By: Matt

Matt — Thu, 03 Aug 2023 20:20:01 +0000

In reply to Mike. Yeah, BMO is in charge of a shadowy cabal that wants to make less money, so they're calling higher inflation. When will they be exposed? !

By: Mike

Mike — Thu, 03 Aug 2023 00:48:06 +0000

Who wrote this? Who are they connected with? Who paid them. Follow the money. Enough said

By: Frank

Frank — Wed, 02 Aug 2023 17:08:51 +0000

In reply to Jon Morbey. Government doesn't care about your equity or your well being. What may happen is intergenerational mortgages same as some other countries. Canada has a workforce that pre plandemic was 30% ready to exit and retire. Inflation has caused those same ppl to dip into retirement savings. Many will postpone retirement and continue working, at a higher tax bracket, to pay for the monumental debt Canada has amassed. Surely it has nothing to do with those that continually virtue signal by sending billions of dollars overseas in aid while our own ppl sleep in tents in the street.