Statistics Canada has made some big moves to improve their consumer price index (CPI) basket. These fixes are a nod toward the way consumer spending has shifted heading into 2024. The changes will affect how the CPI is calculated beginning with that reading, expected in May of 2025.
This shelter component has experienced the largest increase in its heaviness. We now see it making up 29.12 percent of the basket, a slight increase from 28.57 percent. Growing mortgage interest costs and surging rent prices are fueling this trend. Together, these factors are still putting the squeeze on Canadian families.
Beyond the shelter changes, the transportation category experienced a significant jump in its basket share. It now makes up 17.29 percent—which is an increase from its original 16.78 percent share. This rise is clearly due to the greater prioritization of passenger vehicles under the transportation category. This trend and similar ones show how consumers are turning away from traditional notions of personal transportation.
The clothing and footwear in the aggregate consumption segment has also decreased from 4.70 percent to 4.40 percent. At the same time, the category for recreation, education, and reading has dropped from 10.42 percent to 10.16 percent. These types of changes are a reflection of the shift in spending priorities as priorities change within Canadian households.
Each item in the CPI basket holds a weight proportional to its share of total consumer spending, ensuring that the index accurately reflects economic realities faced by households across Canada. Beginning next week, the Consumer Price Index calculations will include these new weights. This amendment will go into effect starting with the May 2025 reading.
The amendments are a reflection of the changing economic landscape in Canada. Specifically, housing and transportation costs are key contributors to inflation prompting the Fed’s actions and to the overall economic health. As consumers face varying pressures in their spending habits, these adjustments aim to provide a more accurate reflection of current market conditions.
