The Globe and Mail has revealed that Statistics Canada has been quietly planning changes to the way it calculates its Consumer Price Index measure of inflation: something I warned about a year ago.
The technical details of these changes may only seem of interest to the pocket protector and calculator crowd, but the reality is they will affect all Canadians: from pensioners and hardhats to those wearing pinstripes.
The consumer price index is the single most important economic measure Statistics Canada produces. Hundreds of billions of dollars of pension payments, tax deductions, payments and credits are explicitly indexed to it in legislation and most workers wages are implicitly linked to it. Changes of a fraction of a per cent in the measurement of CPI could mean billions of dollars in annual savings for governments on one hand and lower incomes for pensioners, workers and taxpayers on the other.
The Bank of Canada estimated the CPI overstates inflation by 0.6 per cent a year because changes in the index don’t adjust as fast as consumers do to lower prices for goods or for improvements in quality of new goods.