Finance Committee on March 31st, 2022

[Greg Peterson]

That's right.

Basically, we're looking for a price for the same services for the coming period.

[Sophie Chatel, Liberal, Pontiac, QC]

You talked about cereal boxes earlier. One of our concerns is that a box of cereal contains less cereal, even though it's the same size. In other words, there's less in the box, but the price stays the same. It's also a phenomenon related to inflation.

You do the calculations, but can you tell us exactly how you manage to find this information?

[Greg Peterson]

When we measure the basket, we use scanner tapes coming from the supermarkets and the grocery stores. We get from these scanner tapes the product that's being sold, including the volume of the box or the weight of the box. We will adjust that purchase to a standard weight, so that we're comparing apples to apples over time.

In that particular case, if we have so-called shrinkage, with a smaller box of cereal being sold at the same price, we would reflect that as inflation.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you very much, Mr. Peterson.

[The Chair, Liberal, Peter Fonseca]

Thank you, Madame Chatel.

Now we're moving to the Bloc and Monsieur Ste-Marie for six minutes.

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

Thank you, Mr. Chair.

Welcome to the entire Statistics Canada team, and everyone listening.

First, I want to thank you for your very important work. It will help legislators make decisions, especially in this time of crisis. Obviously, we are very concerned about inflation, and we make our decisions based on the data you provide us.

I'll start with housing.

Mr. Peterson, in your opening remarks, you pointed out that shelter costs rose by 6.6% in February. This is the largest increase in almost 40 years.

I have a series of questions for you. First, do you expect this to continue to rise in March and in the following months?

And then, what about Quebec?

[Greg Peterson]

We aren't necessarily in a position to make forecasts. However, when we did our estimates of shelter costs, we included not only shelter costs, but also house price Technical difficulty—Editor] of mortgages. So interest rates will also have an impact on the CPI.

I'll ask Ms. Ertl and Ms. Mitchell to answer questions about Quebec.

[Heidi Ertl, Director, Consumer Prices Division, Statistics Canada]

Mr. Chair, I don't have the number specifically for Quebec shelter. We can certainly get that to you. I'm not sure if Ms. Mitchell has it.

[Taylor Mitchell]

Thank you for your question.

I will respond in English.

I can certainly get back to you with specifics, but what I can tell you right now is that the situation for housing in Quebec is certainly reflecting a number of the same pressures that we're seeing throughout the rest of the country, particularly around the Montreal area. We can certainly get back to you with specifics.

Thank you.

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

Thank you to all three of you for your answers. I look forward to seeing that.

I would like to ask you about the quality of the data you use for housing, particularly in relation to Quebec.

Do you think this data is of adequate quality?

Do you have the ability to measure the impact of overbidding? When a building, a condo or a house is sold, among other things, there is a phenomenon of overbidding, that is, people offer more than the list price.

Do you have access to this data?

[Greg Peterson]

We think the data for Quebec is reliable.

However, I will ask Ms. Ertl to answer this technical question.

[Heidi Ertl]

Thank you for your question.

In this case, I believe you're referring to the bidding process when a unit sells for more than the list price. This would be captured when we include our resale housing prices in the shelter component of owned accommodation. It appears in a couple of components: the mortgage interest and the real estate commission fees and land transfer tax. We are basing all of the resale housing prices that are feeding the shelter component on transaction prices, not list prices.

In the case of new homes and the prices we are getting for the new house price index, which of course feeds into a different component, the replacement costs are provided by builders. These are new homes that builders are building, and they provide the prices for us. In those cases, the price is the list price of the new home and may not always necessarily be a transaction price, depending on whether they are selling up front, before houses are being built, or after the fact, on MLS.

There is a bit of a mix, but I can emphasize Mr. Peterson's point that the quality of the data for shelter in Quebec, as well as all the other provinces and the territorial capitals, is of the highest quality. In most cases, it's transaction prices that are all coming from administrative data.

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

Great. Thank you very much.

I see that my time is quickly running out, so I'll ask a question on a completely different topic.

Mr. Peterson, would you say that the war in Ukraine has already had an impact on the February inflation rate, or rather that it may be more noticeable in the statistics in the coming months?

[Greg Peterson]

All of our economic indicators show that the war in Ukraine is affecting the price of many commodities worldwide.

We're tracking this not just in our consumer price index; we're tracking this through movement in a number of our different price indices, such as our industrial product price index and our raw material price index. I think Ukraine is the world's largest producer of neon, for instance. As that is an important input into the production of computer chips, there are supply chain effects.

That's certainly not the only supply chain effect in the world right now, but we are keeping track of what's happening outside of our borders as well as what's happening domestically.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste‑Marie.

We'll now hear from the NDP.

Mr. Blaikie, you have six minutes.

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

Thank you very much.

I know that you were answering that question under some time constraint. I don't know if there's anything you had hoped to add. If so, I'd welcome you to add to your reflections on how and when we might be able to see the effects of the war in Ukraine in the consumer price index or other data that bear on Canada's economic forecasting.

[Greg Peterson]

Well, as I mentioned earlier, I think we [Technical difficulty—Editor] for sure that's had an impact on what we're seeing at the pump. Insofar as gasoline is an input into a whole range of other things, we are starting to see that as well.

Those are my initial thoughts.

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

I wanted to follow up on something that came out of testimony the other day here at committee. It was on the question of how housing costs are incorporated into the CPI. As interest rates go up, even if that results in a decline in housing prices over the medium term, we might find ourselves in a position where, while housing prices are coming down, housing prices drive up the CPI, because the monthly costs increase.

I respect that there's no perfect model for how to try to incorporate housing data into the CPI, but I'm wondering less about the question of that data and more on this question: What role do you think there is for folks like us, or for Stats Canada, to try to help explain to Canadians in a moment like that why it is that as housing prices are decreasing, they're seeing a corresponding increase in housing costs within the CPI?

[Greg Peterson]

I don't think you can look at any single economic indicator and say that it is the panacea that describes absolutely everything. As I described in my opening remarks, the consumer price index aims to measure how much it costs consumers to own a home. For sure, you'd include mortgage interest costs. For sure, some aspects of the price of the house are going to figure into it. There are other price indices, such as our residential property price index, which measures the purchase price of the house. That would be the proper index to use if you were taking a look at the prices that consumers are facing when they are purchasing a single home.

Similarly, I would take a look at the national balance sheet accounts to see overall household indebtedness and the mortgage debt that's being taken on by homeowners. I would also take a look at changes in household wealth over time in the national balance sheet accounts.

To develop a comprehensive picture, the CPI is developed, really, for two things. One is to be a means to escalate things like cost-of-living increases in contracts and stuff like that. The second is to be a tool to help inform monetary policy.

If you want that broader narrative on the issues facing Canadians, I don't think we can narrow it down to a single indicator.

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

Thank you for that.

The CPI does a pretty good job of telling us where we've gotten to. I think there's a lot of interest at this table and elsewhere in trying to figure out where we're heading.

I'm wondering what other data Statistics Canada publishes that you would point us to in order for us to see signs that some relief may be coming within certain aspects of the economy, or indicators that might show that in so many months' time we might look forward to seeing a decrease in the consumer price index.

[Greg Peterson]

Well, while Statistics Canada is not in the business of forecasting, I think it is worthwhile taking a look at what's happening along supply chains. Over the course of the pandemic, we've seen that every product and every service has its own story. If you want to look at new housing, for instance, I would take a look at the construction price index and how that is changing. I'd take a look at the material inputs that go into the construction of a house—lumber costs—and see how those are changing.

One aspect of the past 12 months is that we've seen different commodities really face different stories. The description of the pathway for telecommunications services is that, again, telecommunication service providers have provided more data for not as much money, so the overall price has gone down.

It's really decomposing the value chains and supply chains to understand what's happening upstream.

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

Thank you very much.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Blaikie.

Members, we're moving into our second round, starting with Mr. Chambers for the Conservatives, for five minutes.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you very much, Mr. Chair, and thank you to our officials.

Mr. Peterson, it's nice to see you and your colleagues today. Thank you for coming back for our very important study.

I hope to get to five questions, and if we could spend 30 to 45 seconds in responses, that would be very helpful.

I'd like to augment my colleague's request in the first round with respect to methodology. It would be helpful for this committee, or at least for me in my role here, to look at what the inflation rate would have been in 2000 and using the 2000 methodology, as well as in 1990 and 1980. If we could do that, I think that would help us with an apples-to-apples comparison when we look backward.

Is that something that would be available?

[Greg Peterson]

We'll provide that to the committee.

Again, I would caution that over time, household consumption patterns change. There were some products that may have been sold in the past that are no longer being sold, so we wouldn't have a price for them.

I just want to make—