Finance Committee on March 31st, 2022

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Okay, I'll move on to a different topic here.

You said earlier, in response to my colleague's questions, that deficits lead to inflation. Would you care to expand on that?

[Greg Peterson]

I'm sorry. Could you repeat the question?

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

You said earlier in response to Mr. Fast's question that the increased deficit spending was creating inflation. You said it put more money into Canadians' pockets and therefore they spent more, which created more inflation. You had more money chasing fewer goods, which was creating inflation.

[Greg Peterson]

I was pointing to data where we have hard numbers. When we take a look at the composition of inflation and what causes inflation, largely our analysis is focused on supply chain issues.

I was referring to data from a national balance sheet account, where we're looking at the change in the wealth of households over time on a disaggregated basis by income quintile and wealth quintile.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

More money chasing fewer goods equals higher inflation. That's been the case in the five worst cases of inflation: There was higher deficit spending, which creates more money chasing fewer goods, which creates inflation.

One other thing that you added, with respect, was that taxes are inflationary as well. Could I ask for StatsCan to table with our committee a report showing the inflationary impact of all the tax increases over the last seven years?

[Greg Peterson]

If I can clarify what Ms. Ertl said, we don't do an analysis of the impact of taxes on inflation. We do include the value of a tax in the pricing of a commodity. An excise tax would be included in the price of whatever good has been sold.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Yes, I'm aware of that.

I'm asking you, though, to break—

[The Chair, Liberal, Peter Fonseca]

That's the time, Mr. Lawrence.

We are moving to the Liberals and Mr. Sorbara for five minutes, please.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Chair, and good afternoon to the folks at Statistics Canada.

I very much enjoy reading “The Daily”, which is the publication on the website. This morning's publication was on gross domestic product for Canada. I think it was for February, when we saw the Canadian economy continue to outperform expectations. It continues to grow as we continue to fight the pandemic but recover from it and deal with global events. It's good to see the Canadian economy continue to grow. It's now larger than it was prepandemic.

For my first question, I just want to ask about response rates. I know it's not dealing directly with the inflation measure. You released the SEPH survey today as well. It's interesting to see that. I wish it was a little more up to date instead of a lag indicator.

How are the response rates for measuring the economic indicators that we have from Stats Canada?

[Greg Peterson]

It largely depends on the kind of survey we're talking about. Essentially, it depends on the source. In many cases, we're using administrative data in order to drive forward an estimate, in which case we're getting a full census of volatility.

In other surveys, if I'm thinking about the monthly survey of manufacturers, the monthly retail trade survey, we're taking a look at response rates in the 80% to 85% range, and those are the economic production surveys that feed into GDP.

GDP itself is a composite measure. It's bringing in data from a range of different sources, so it's not possible to say there's a single response rate for GDP.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

In terms of calculating your LFS number—your labour force survey number—the response rates during COVID were obviously a little more challenging, but have they come back to better numbers?

[Greg Peterson]

I would have to get back to you on specific response rates for the labour force survey. I don't have those off the top of my head.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Okay, that's no problem. I want to add, just to put it on the record, that one bank's economist stated, “Canada's economy is on a tear with growth surpassing the Bank of Canada's forecasts.” It's great to see the Canadian economy continue to outperform.

I have a quick question in terms of measuring inflation. As someone who has studied economics at the master's level and had an opportunity to do a Ph.D. or go work on Wall Street and decided to go work on Wall Street, on the estimation of using hedonic pricing, if I go back in my memory.... Can you comment on that in terms of the preferred pricing measure that Stats Can uses for inflationary estimates?

[Greg Peterson]

Again, it depends on the commodity. We do use hedonic pricing. Maybe I could turn to Ms. Ertl to give us examples of where we do that.

[Heidi Ertl]

Yes, hedonic pricing is used in our quality adjustment process—Mr. Peterson addressed that—particularly with respect to items that change frequently. We use hedonic quality adjustment for things like electronics and computers—smart phones, for example. It's really the most robust way to ensure that we are taking into account quality changes over time to these types of commodities, and to maintain that consistent product over time.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

The use of hedonic pricing when it comes to measuring the CPI, because there's obviously the intangible, the qualitative factor when you look at a product and price adjustments there.... When you rebase it, does that tend to drive up the inflation number, or does it just make it a more apples-to-apples comparison?

[Heidi Ertl]

Exactly. The objective is to make sure that the product is consistent over time, so apples to apples. There is a study that was released on the impact of various quality adjustment methods, which we can include in a follow-up package.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

If I can just get that flagged, that would be great.

Peter, do I have more time?

[The Chair, Liberal, Peter Fonseca]

You have 45 seconds.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Okay. In terms of the inflation measurement that Statistics Canada uses, how often do you evaluate that versus what other countries use, specifically versus what they use in the United States, what comes out of the Federal Reserve, and other sources in the ECB?

[Greg Peterson]

We work closely with other national statistical offices and with international organizations to share methods and look for best practices. There are international fora for this. Under the UN umbrella, there is the Ottawa Group on Price Indices [Technical difficulty—Editor] worked on under the umbrella of the IMF.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Sorbara.

We have now the Bloc, with MP Ste-Marie, for two and a half minutes.

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

Thank you, Mr. Chair.

Mr. Peterson, some economists, such as Nouriel Roubini, are saying that right now, given the particular international situation, the risk of stagflation, let's say on a western scale, is much higher. We're talking about inflation data right now. My colleague Mr. Sorbara talked about economic growth in Canada.

At Statistics Canada, are you currently seeing any indicators of real growth that might suggest a slowdown in growth for the economy as a whole, for certain sectors or for certain provinces?

[Greg Peterson]

Our mandate does not include forecasting analysis per se.

As we've indicated, today's release indicates the fourth straight monthly increase in GDP over a period when we've seen increasing inflation. We haven't hit that period of stagflation yet, if it is to occur. This is certainly something that we are monitoring and will continue to track.