Finance Committee on Jan. 17th, 2022

[Anil Arora]

There are two concepts here. One is how you measure the change in that basket as exemplified by that typical expenditure. It just says that in terms of shelter costs, we're talking about an average household spending about 30%. That serves as the weight in the basket, and then you see that change over time. Year over year, it has gone up 4.8%. I think I talked earlier about the different components of what that means.

This whole notion of a percentage of the income of a household is a separate measure, and that's where I was going in terms of the core housing needs. We do measure that as well.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Arora.

Just before we move to the Liberals and Mr. Baker, Ms. Ertl, you have your hand up.

[Heidi Ertl]

It's only if there would be time to take this—

[The Chair, Liberal, Peter Fonseca]

Okay, I thought it was maybe for something.... No, not at this time.

[Heidi Ertl]

That's fine.

[The Chair, Liberal, Peter Fonseca]

We're now moving to the Liberals and Mr. Baker.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thanks very much.

Mr. Arora, and to your team, thank you very much for being here and for all the work you do in collecting the data at Statistics Canada and providing the insights that helps policy-makers and Canadians make important decisions that touch us all. Thank you on behalf of our team and our caucus for that.

My first question is this: Is the current rate of inflation experienced in Canada unique to Canada, or is this a global problem?

[Anil Arora]

I won't judge whether it's a problem or not, but certainly our rate was 4.7% year over year in the last release that we put out. When you compare that to, let's say, the OECD average, which is at 5.8% or 5.9%, you can see that there are many countries that are higher. The U.S., of course, has a rate quite a bit higher than ours, and then there are other countries—Switzerland, for example—that have a much lower rate than ours. By and large, we are in the middle of the pack with other G7 European countries, which have about the same rate as ours or are maybe even a little bit higher than we are.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Okay. That's great. Thank you for that.

The economists I have read on the topic of inflation recently have indicated that the current rate of inflation in Canada is caused by a number of key factors. They cite things like supply chain bottlenecks and shortages of key materials; labour shortages, which have caused increases in the cost of labour in certain sectors in particular; changes or increases in the price of gas or energy over time; and stronger consumer demand. When economies reopened, consumer demand picked up, so demand for those goods increased.

Do you agree that those are the primary causes of the inflation we're seeing right now?

[Anil Arora]

Yes, I think our figures show that.

The only thing I would add is a shift in the nature of that demand now as well, as we've discussed before as it pertains to eating at home and cooking at home as opposed to in a restaurant. Also, even in a restaurant, as you know, many restaurant owners had to invest in patios and so on with lumber prices that were quite high, so even in going out to eat you're seeing higher costs.

We talked about housing. The nature of that demand has obviously resulted in a shift in production and where it's coming from. A higher savings rate has resulted in people wanting to renovate and upgrade their houses and so on.

I wouldn't discount the nature of the change, in addition to the points you have raised, as being components of what we see in that increased CPI.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

[Technical difficulty—Editor] just said that we know inflation is a global phenomenon and that it's faced by countries around the globe. We know the factors that it's driven by. You and I have just talked about those. You've just cited those or agreed to the ones that I cited. There are some who are arguing that somehow government spending has caused what we're seeing in Canada, that it has caused this global inflation problem.

Mr. Poloz, the former Bank of Canada governor, recently was interviewed. He was asked about this. He said:

I think that's not right... In fact, what the stimulus did was to keep the economy from going into a deep hole in which we would have experienced persistent deflation.

Do you agree with what Mr. Poloz is saying?

[Anil Arora]

I'm going to reserve judgment on the different aspects.

All I can say is, has there been a net transfer from government to households? Yes. Has that resulted in an increased savings rate? The answer is yes. Has it had a disproportionate impact, as we discussed earlier, on regions and parts, on different households and so on? The answer is yes. Does that factor—in addition to all those other aspects that we just talked about—in an increased demand and potentially, in some cases, a diminished supply? The answer is yes.

All those factors are important to take into account when you see what the figures are showing us in the various elements and in various parts of this country.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Okay, but based on.... I'm thinking back to your prior answer to my prior question. What I heard you say—and I'm just asking to make sure I understand—is that the primary drivers of inflation today are those other things we talked about: supply chain bottlenecks, labour shortages, the shifts in the nature of demand that you spoke to, and stronger consumer demand afer the reopening. Are those still the primary drivers? I appreciate that there are many drivers, but are those the primary ones?

[The Chair, Liberal, Peter Fonseca]

We'll have a short answer, please.

[Anil Arora]

The ability to consume is the biggest driver, and these are actual costs that people are paying. The source of where that ability to consume is coming from has various aspects to it and, of course, what we're measuring in the CPI is what that change by those components we talked about is. It is a combination of those things.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Now we'll move to the Bloc and Monsieur Ste-Marie for two and a half minutes.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

Mr. Arora, if I understand Statistics Canada's approach correctly, the statistics that you publish, for example those on inflation, get reviewed later.

Can you explain to the committee the process that is followed when preliminary data is published? How many times will it be reviewed? What kind of changes could be made?

[Anil Arora]

Thank you very much for your question.

No, we do not review the CPI data. Of course, we adjust the seasonal measures after consulting with experts, but the results are the results and we usually do not adjust them.

There are several reasons for that. The first has to do with quality. The second is that the results are used in many different ways, such as to establish pensions and wage agreements, among other things. It would cause problems if we were to continually adjust the data.

If there is a problem with the quality of the data, we correct it immediately, but we are not in the habit of systematically reviewing the data, so the answer to your question is no.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Your answer was very clear. Thank you.

Many of my colleagues talked about what is happening in other countries.

To what extent can the inflation-related measures published by Statistics Canada be compared to the statistical data of the United States, other G7 countries or Europe? Do we all use the same method? Can comparisons be made?

[Anil Arora]

Other organizations establish the standards and we follow them.

However, in a situation like ours, we have to personalize some of the CPI subcomponents. For example, obviously, the records, the level or quality of data, the data sources available, and the burden on and resources available to Statistics Canada determine the priorities, methods and data sources that will give us the best numbers. We are among the best in the world in terms of data quality.

[The Chair, Liberal, Peter Fonseca]

Thank you.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Arora.

Mr. Chair, I would like to rise on a point of order.

A few minutes ago, the interpreters indicated that they were having a hard time doing their job because Mr. Blaikie and Mr. Arora were speaking too quickly.

[The Chair, Liberal, Peter Fonseca]

Thank you, Monsieur Ste-Marie.

On that note, if everybody could just slow down a little bit in terms of the pace of their speaking and could be very clear, that would help our great interpreters. They do a fabulous job and we thank them very much.

We are now moving to the NDP. We have Mr. Blaikie up for two and a half minutes.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much.

My question has to do with the increase in the price of groceries. I'm curious to know whether the Statistics Canada information, the information that you collect and have access to, helps us understand where the cost pressures are when it comes to grocery pricing.

There's the primary production. There's processing and packing. There's transportation, and then there's retailing. Could you talk a little bit about where costs are going up in particular within that supply chain and what some of the factors [Technical difficulty—Editor] increase?

[Anil Arora]

Certainly. I'll try to address both parts of your question and maybe even ask my colleagues to jump in.

The first thing we do is to get a couple of hundred food items from each of the major grocery chains out there. We get millions and millions of actual prices and quantities of what people are buying sent to us at Statistics Canada. When that can of beans or that pot roast or whatever it is goes across the scanner, we get a copy of that. Then, as I mentioned earlier, based on the weights of what people are consuming, we determine the price change for the same quantity adjusted for that quality difference, and then we come up with the price of that.

We look at food, non-alcoholic beverages and meat specifically. We have breakdowns of those. For example, meat makes up about 2.3% of the weight of that basket, and we know that's gone up 9% year over year. Month to month, it actually dropped 0.4%. Some things have gone up but fresh vegetables, for example, have actually gone down.

The second part of your question was what the determinants are. Weather, no surprise, is a major determinant of what's going on. When we've seen droughts, the slaughter prices have gone up, and of course we saw a big shift there as nobody could feed their livestock, so we saw increases. Weather is a major factor.

The input costs—fertilizers and so on—are based on the price of fuel and so on. As we see changes in those, we'll see changes creeping up into the food costs. You mentioned supply chains, and, of course, we know that a certain portion of our goods are from the States, for example, or are imported. Those are the factors there.