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Cost of gas rises as prices for veggies fall

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  |  Posted: Wednesday, Oct 24, 2012 06:00 am

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Shoppers in Alberta continued to enjoy low overall price inflation in September, although they could be forgiven for feeling they weren’t getting such a good deal.

Last month, the annual increase in prices as measured by the consumer price index rose by 1.4 per cent in Alberta – higher than the 1.0 per cent increase posted in July and higher than the Canadian inflation rate of 1.2 per cent.

The Bank of Canada’s core index – which removes eight of the most volatile components of the basket of goods and services – rose 1.3 per cent. That remains well below the Bank of Canada’s target inflation rate of 2.0 per cent.

Alberta grocery shoppers may have gotten some pleasant surprises in the produce aisle, however. The year-over-year prices for fresh vegetables fell a whopping 11.9 per cent. Food prices overall rose by only 1.3 per cent, slightly less than the overall inflation rate. And prices are much lower than a year ago for women’s clothing (-4.3 per cent) and natural gas (-24.7 per cent).

But not everything felt like such a great deal for consumers. Gasoline prices were higher by 7.2 per cent, and electricity rose by nearly a fifth (19.9 per cent).

And while it is possible to cut back a bit on the consumption of these two sources of energy, it is very difficult to go without gas and electricity altogether. The pinch felt from inflation on these non-discretionary items tends to feel worse.

As well, other costs not necessarily tracked by the consumer price index can also chew into the household budget. As pointed out in some recent polling research done by ATB Financial, many Alberta households are facing rising costs for their children’s sports and extracurricular activities. More than half of parents (52 per cent) responding to the survey reported rising costs for sports are preventing them from registering their kids.

Housing

The Canadian Real Estate Association announced home sales were down 15.1 per cent in September on a year-over-year basis, but the average national home price was up slightly, by 1.1 per cent, to $355,777 over the same period. Average home prices in Alberta were nearly identical to the national average, at $355,127, a 0.1 per cent increase over 2011 levels.

Much of the decline in activity is due to lingering effects of the recent changes to mortgage insurance, with the maximum amortization period having been lowered to 25 from 30 years.

Agriculture

The United States Agricultural Department (USDA) released its Livestock, Dairy, & Poultry outlook this week. The USDA sees some of the recent strength in cattle prices tapering off due to higher feed prices and weaker wholesale demand.

Also of interest was the USDA’s outlook on pork. There had been reports of a world-wide pork shortage, but the agency highlights that pork inventories are fairly high, as demand from Asia is expected to decline slightly as income growth stalls.

Canada’s business

Could Canada have a sovereign debt crisis? The MacDonald-Laurier Institute published a paper this week looking at how the implicit bailout guarantee provides a real benefit to provinces, as evidenced by abnormally low interest rates relative to default risk.

The default risk had to be modeled and in the near-term the report doesn’t see any material risk, but there is a real concern for the 10-to-30 year timeframe.

Prepared by ATB Financial. Reprinted courtesy of www.troymedia.com.


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