The Consumer Price Index (CPI) rose 5.2% year over year in February, following a 5.9% increase in January. This was the largest deceleration in the headline CPI since April 2020.
The year-over-year deceleration in February 2023 was due to a base-year effect, for the second consecutive month, which is attributable to a steep monthly increase in prices in February 2022 (+1.0%).
Excluding food and energy, prices were up 4.8% year over year in February 2023, following a 4.9% gain in January, while the all-items excluding mortgage interest cost rose 4.7%, after increasing 5.4% in January.
On a monthly basis, the CPI was up 0.4% in February, following a 0.5% gain in January. Compared with January, Canadians paid more in mortgage interest costs in February, which was partially offset by a decline in energy prices. On a seasonally adjusted monthly basis, the CPI rose 0.1%.
12-month change in the Consumer Price Index (CPI) and CPI excluding food and energy
While inflation has slowed in recent months, having increased 1.2% compared with 6 months ago, prices remain elevated. Compared with 18 months ago, for example, inflation has increased 8.3%.
Price growth slows to 1.2% over the past six months
Base-year effects and the headline Consumer Price Index
The Consumer Price Index (CPI) is a standard measure of the price of a representative basket of goods and services. The headline consumer inflation is measured as the percentage change between the CPI in the current month (February 2023) and the CPI in a base month or the same calendar month of the previous year (February 2022).
A base-year effect refers to the impact that price movements from 12 months earlier have on the current month’s headline consumer inflation. When a large 1-month upward price change in the base month stops influencing or falls out of the 12-month price movement, this has a downward effect on headline CPI in the current month. Conversely, a large 1-month downward price change in the base month creates upward pressure on the current month’s 12-month figure.
In the first half of 2022, the global economy was significantly affected by the Russian invasion of Ukraine, and Canadian consumers experienced a significant increase in prices from January to June 2022. Headline consumer inflation increased from 5.1% in January to 8.1% in June 2022. The broad increase in prices in the early months of 2022, led by energy products, had a downward impact on the year-over-year rate of consumer inflation in February 2023, because higher prices from February 2022 were used as the basis for year-over-year comparison.
Price increases observed in the first half of 2022 will continue to fall out of the 12-month price movement. While inflation has slowed in recent months, prices remain elevated. Users should consider the impact of base-year effects when interpreting the 12-month price movement.
Slowdown in headline inflation reflects a base-year effect following strong price increases in February 2022
Prices increase at a slower pace in four major components in February
Grocery prices remain elevated
Food purchased from stores rose 10.6% year over year in February, marking the seventh consecutive month of double-digit increases. Continuing to put upward pressure on grocery prices are supply constraints amid unfavourable weather in growing regions, as well as higher input costs such as animal feed, energy and packaging materials.
Price growth for some food items such as cereal products (+14.8%), sugar and confectionary (+6.0%) and fish, seafood and other marine products (+7.4%) accelerated on a year-over-year basis in February.
Prices for fruit juices were up 15.7% year over year in February, following a 5.2% gain in January. The increase was led by higher prices for orange juice, as the supply of oranges has been impacted by citrus greening disease and climate-related events, such as Hurricane Ian.
In contrast, price growth for other food items slowed, on a year-over-year basis in February compared with January, including non-alcoholic beverages (+11.1%), meat (+6.2%), vegetables and vegetable preparations (+13.9%) and bakery products (+13.9%).
Prices for dairy products also rose to a lesser extent on a year-over-year basis in February (+9.1%) compared with January (+12.4%), partially due to a base-year effect. The slowdown stemmed from higher prices in February 2022, when the Canadian Dairy Commission increased the price that processors paid farmers, the largest price increase on record.
Canadians continue to feel the impact of higher food prices in February
Energy prices fall on greater supply
In February, energy prices fell 0.6% year over year, following a 5.4% increase in January. Gasoline prices (-4.7%) led the drop, the first yearly decline since January 2021. The year-over-year decrease in gasoline prices is partly the result of a base-year effect, as prices began to rise rapidly in the early months of 2022 during the Russian invasion of Ukraine.
On a monthly basis, Canadian drivers paid 1.0% less for gasoline in February amid higher crude oil inventory levels within the United States.
Prices for fuel oil and other fuels rose at a slower pace year over year in February (+24.3%) compared with January (+36.5%).
Gasoline prices decline on a year-over-year basis for the first time since January 2021
Shelter costs increase at a slower pace for the third consecutive month
Shelter costs rose at a slower pace year-over-year for the third consecutive month, rising 6.1% in February, after an increase of 6.6% in January. The homeowners’ replacement cost index, which is related to the price of new homes, slowed on a year-over-year basis in February (+3.3%) compared with January (+4.3%). Other owned accommodation expenses (+0.2%), which includes commissions on the sale of real estate, also decelerated in February. These movements reflect a general cooling of the housing market.
Conversely, the mortgage interest cost index increased at a faster rate year over year in February (+23.9%) compared with January (+21.2%), the fastest pace since July 1982. The increase occurred amid a higher interest rate environment.
Explore the Consumer Price Index tools
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Year over year, prices rose at a slower pace in February compared with January in nine provinces. Prices in British Columbia were unchanged compared with January, with lower energy prices offset by higher prices for rent (+8.1%).