What is your personal rate of inflation? It’s probably different than the rate that gets reported by Statistics Canada every month.
Generally speaking, when people refer to the inflation rate, they’re talking about the 12-month change in the Consumer Price Index. The CPI rose 6.3 per cent in December from a year earlier, slowing from the 6.8-per-cent pace in November.
The CPI comprises hundreds of goods and services that people buy – everything from eggs and electricity to car rentals and cannabis. Statscan tracks the prices of all those items, then generates a final number that accounts for how the average family spends their money.
Put another way, because the average household spends a lot more on housing than, say, clothes or smartphone bills, shelter costs account for a larger part of how inflation is calculated.
This leads to inflation figures that, while informative, aren’t reflective of your circumstances. You probably don’t buy everything on that long list of goods and services – let alone in the same proportions.
Here’s an example: If you don’t own a vehicle, you weren’t affected by wild swings in gasoline prices last year. On the other hand, a two-car household that drives frequently saw their costs soar.
Thus, your experience with inflation is dictated not only by what you buy, but how much of your budget is allocated to that item.
That’s why The Globe and Mail created a personal inflation calculator. We’ve distilled CPI to a handful of key categories. Punch in your monthly expenses and we’ll calculate the annual change in consumer prices, based on your budget.
This calculator uses data from the Consumer-Price Index compiled by Statistics Canada. The national inflation rate is an average of CPI changes of goods and services, weighted to reflect the relative importance of goods and services to a typical Canadian household. This rating of importance is referred to as “basket weights”, or the relative proportion of a total household budget spent by Canadians on individual goods and services.
The personal average inflation rate is calculated in the same way but takes individuals’ spending patterns into consideration. By entering your monthly expenses, it calculates your personal basket weights – or the proportion of your budget going to each category - and applies them to each category’s CPI change. Because all calculations are relative to the total household budget, increasing or decreasing an amount in one category will change the level of inflation experienced in other categories as well. Finally, the calculator sums up results of each category and provides you with your personal inflation rate.
The CPI data used throughout is from December 2022.
With files from Matt Lundy