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Email this11:38 am
October 29, 2017
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Show me a YoY negative inflation rate.
11:43 am
October 29, 2017
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Only a negative YoY rate can be deflation. We have a negative MoM rate which is disinflation and characterizes decreased inflation but remains positive.
12:03 pm
May 15, 2007
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Vatox said
Peter, you really need to weigh in here. This is your site and Norman1 is adamant that deflation has occurred. Do you want this incorrect information on your site?
The only thing I will say for now is that the level of condescension in this thread is unacceptable and unnecessary. Stick to the facts and we can all have a useful discussion.
12:19 pm
October 29, 2017
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Peter, you have people adamantly reporting deflation. This is false and is not sticking to the facts as you state. What are you going to do about it?
If you want me to stop posting in the forums, I will. But surely the correct information is more important. You call it.
12:46 pm
September 11, 2013
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Ok, Vatox, if your definition of deflation is "negative YoY rate" and any other decline is "disinflation" to you, then fine, I think we all agree - the disagreement is re your definitions. Bottom line is we can have months or longer where CPI/prices actually decline even though we maybe haven't had a full year where that has happened lately.
1:02 pm
August 4, 2010
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I'm a little confused about what exactly various people are defining, but if you say inflation is the YoY rate, then the CPI basket in September 2018 showed 2.2% inflation from September 2017; that is less inflation than if you compared August 2018 to August 2017, but it is still YoY inflation. The decrease in the YoY value from the previous month is what Vatox (and others) calls "disinflation"; it is not YoY "deflation".
But the index did indeed drop (from 134.2 to 133.7) between August and September, and that does mean that at least some prices went down (others may have gone up), and that the net cost of the basket (after all the weightings) was slightly less in September, for what that is worth. I suppose you could say that the basket deflated on a monthly (MoM) basis, but since the rolling YoY is what most people are talking about when they say "inflation", "deflation", etc. it is rather confusing, and is why the "disinflation" concept is useful.
Even in a generally inflating economy it is possible to have little downward burps from month to month. In this case, it looks like it is swings in gasoline and things related to the crude oil price. If you look at the "core" CPI numbers (which exclude gasoline and some other volatile items), the MoM basket index is actually unchanged from August to September.
2:07 pm
October 29, 2017
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Bill said
Ok, Vatox, if your definition of deflation is "negative YoY rate" and any other decline is "disinflation" to you, then fine, I think we all agree - the disagreement is re your definitions. Bottom line is we can have months or longer where CPI/prices actually decline even though we maybe haven't had a full year where that has happened lately.
They are not my definitions. They are universally defined.
2:35 pm
October 29, 2017
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NorthernRaven said
I'm a little confused about what exactly various people are defining, but if you say inflation is the YoY rate, then the CPI basket in September 2018 showed 2.2% inflation from September 2017; that is less inflation than if you compared August 2018 to August 2017, but it is still YoY inflation. The decrease in the YoY value from the previous month is what Vatox (and others) calls "disinflation"; it is not YoY "deflation".But the index did indeed drop (from 134.2 to 133.7) between August and September, and that does mean that at least some prices went down (others may have gone up), and that the net cost of the basket (after all the weightings) was slightly less in September, for what that is worth. I suppose you could say that the basket deflated on a monthly (MoM) basis, but since the rolling YoY is what most people are talking about when they say "inflation", "deflation", etc. it is rather confusing, and is why the "disinflation" concept is useful.
Even in a generally inflating economy it is possible to have little downward burps from month to month. In this case, it looks like it is swings in gasoline and things related to the crude oil price. If you look at the "core" CPI numbers (which exclude gasoline and some other volatile items), the MoM basket index is actually unchanged from August to September.
Your understanding is very good.
The thing to remember is that YoY values each month represent only that month as compared to that same month in the previous year. Positive YoY is inflation and negative YoY is deflation.
The MoM values represent the difference of inflation/deflation between consecutive months of the same year. MoM values are not about increase/decrease in prices of consumer goods, they are only the difference between the YoY values of consecutive months in the same year. Basically speaking, the MoM values measure the changing speed of inflation/deflation. A negative MoM means inflation is slower, a positive MoM means higher inflation and prices are rising faster. A Zero MoM is unchanged inflation speed.
Since YoY values only represent a single month, you must add all the YoY values for the 12 months of the year and divide by 12 to get the yearly rate. The yearly rate is what goes in the history books so when you look up the year of say 1980, it will show the yearly rate.
A negative YoY value is the only way to get deflation. A negative MoM rate only means the rate of inflation is slower.
In a scenario where we have deflation(negativeYoY) then a negative MoM would actually mean that the fall of prices is faster, that is, the deflation is picking up speed.
4:25 pm
August 4, 2010
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Vatox said
The MoM values represent the difference of inflation/deflation between consecutive months of the same year. MoM values are not about increase/decrease in prices of consumer goods, they are only the difference between the YoY values of consecutive months in the same year. Basically speaking, the MoM values measure the changing speed of inflation/deflation. A negative MoM means inflation is slower, a positive MoM means higher inflation and prices are rising faster. A Zero MoM is unchanged inflation speed.
I'm not sure what numbers and misunderstandings have floated through this thread, but this is not correct when talking about what StatsCan describes. As you can see from the Daily release for September CPI, they say "...the CPI decreased 0.4%...". This means that the index value for the All-Items basket decreased from 134.2 in August to 133.7 in September [ (134.2-133.7)/134.2 = 0.4%]. This is the month over month change in the CPI, and makes no reference to any YoY or annual values.
What you are describing, the change between the YoY values in two consecutive months, sounds like some sort of "momentum" or "velocity" value. It might be useful in some circumstances, but it isn't something StatsCan calculates in their general info releases, or what most people here are probably thinking about for a monthly inflation change. I'm also not sure your description would necessarily work - because the YoY values depend on the difference between, say, August 2017/Aug 2018 and Sept 2017/2018, I think you could have a negative value in your calculation, even if inflation is actually accelerating as shown by the two 2018 months. But I'm too lazy to work out an example to be sure.
5:11 pm
October 29, 2017
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They don't mention the YoY values because they are the YoY values.
If you take September 2017 divided into September 2018 then subtract that result from 1, you get 0.022 which is 2.2% as a numeric decimal value.
You can do the same for August. I hope it calculates 2.8%
They are assuming that readers understand that the values are YoY 
I hope that helps.
5:39 pm
October 29, 2017
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NorthernRaven said
Vatox said
The MoM values represent the difference of inflation/deflation between consecutive months of the same year. MoM values are not about increase/decrease in prices of consumer goods, they are only the difference between the YoY values of consecutive months in the same year. Basically speaking, the MoM values measure the changing speed of inflation/deflation. A negative MoM means inflation is slower, a positive MoM means higher inflation and prices are rising faster. A Zero MoM is unchanged inflation speed.
I think you could have a negative value in your calculation, even if inflation is actually accelerating as shown by the two 2018 months. But I'm too lazy to work out an example to be sure.
If inflation is accelerating in a dominant inflationary period, there is no way to get a negative value. A negative MoM value can only come from a decellerating inflation rate and that is exactly what we have, a slowing of the Inflation rate.
I'm thinking you may be confusing acceleration/ deceleration with inflation/deflation. Deceleration does not mean deflation.
YoY values represent inflation/deflation and MoM values represent acceleration/deceleration.
6:01 pm
October 29, 2017
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I found the misunderstanding in this thread. I missed it because it's inherent to me.
This is what all three people have been saying, they have repeated the same text over and over and over. And I missed it. I'm sorry for that. I failed you.
Here is the misunderstanding:
The CPI dropped. Everyone has said that.
The problem comes in when you interpret what is reported. They are reporting a decrease in MoM and the MoM is the difference between YoY in consecutive months.
In other words, StatsCan statement that CPI dropped is referring to the inflation decrease and not to a price drop. The CPI decrease referred to is a MoM CPI and not a YoY CPI.
That's why it can be confusing, there has not been any negative YoY rates this year.
6:20 pm
April 6, 2013
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Vatox said
Okay Norman1, what dropped exactly, prices or CPI? They are different things, so don't tell me they both fell.
Yes, both prices and CPI fell during September.
Consumer Prices Index (CPI) and prices are equivalent. CPI is just
100 x (current price of basket) / (price of basket in 2002)
That's done to scale the index to be a nice round 100 at a point in 2002.
CPI at the end of August was 134.2. That means basket price was 1.342X price in 2002. At the end of September, CPI was 133.7. That means basket price was 1.337X price in 2002.
So, from end of August to end of September, CPI and prices changed by
CPISept/CPIAug - 1
= 133.7/134.2 - 1
= -0.004
= -0.4%.
6:47 pm
October 29, 2017
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That is incorrect Norman1, prices never fell. You can call StatsCan or any certified economy professional. I guarantee CPI PRICES did not fall. The rate of inflation fell.
CPI is inflation. It's not prices, it's an index representing price increase or decreases.
I really want a certified economist to weigh in here. I have better things to do.
7:17 pm
September 11, 2013
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Norman1 says "CPI at the end of August was 134.2. That means basket price was 1.342X price in 2002. At the end of September, CPI was 133.7. That means basket price was 1.337X price in 2002."
Vatox, what say you to the above? It clearly shows CPI (the Index) and prices fell during the period September 1 - 30, 2018. The basket of goods and services costed less on September 30 than it did on August 31, that is a fact. Yet you say "prices never fell", when in September they did - ??
8:00 pm
October 29, 2017
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In the basket of goods some prices do fall, but the CPI YoY did not.
There is absolutely no deflation in 2018.
My answer will not change, because it is correct!
If you want to keep pushing me, the facts can't be disputed. As I said, please get a certified economist to weigh in.
9:01 pm
October 21, 2013
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If there are any "certified economists" on this forum, they have not identified themselves in the five years that I've been involved. And, even if they were and did, we can't verify that when everyone is anonymous.
On this forum, we are limited to using our own wits to evaluate what others post and to pose our own arguments. And that's what I believe is going on now.
If I may say so, Norman1 has in the past proven to be one of the most reliable members of this forum, if not the most reliable. While anyone can make a mistake, it is more likely that there is a misunderstanding, since both of you seem knowledgeable. I suspect the problem is semantic, but am not going to try to untangle it as it would take more work than seems warranted.
I must say that I have always found CPI calculations and so on to be confusing, so much so that I have suspected they were deliberately arranged to confuse more than to inform, and/or to give permission to various pensions and benefit programmes to give us the lowest possible increase! At the beginning of every year, I look to see what the inflation is supposed to be for the most recent year, and every time I find different numbers on different sites, all of which are supposed to be reputable.
9:07 pm
October 29, 2017
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Here is something straight up. Annual inflation below zero.
https://www.tutor2u.net/economics/reference/countries-experiencing-price-deflation
Please note. It states Annual inflation below zero and not Month on Month below zero.
4:38 am
April 6, 2013
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Loonie said
…
I must say that I have always found CPI calculations and so on to be confusing, so much so that I have suspected they were deliberately arranged to confuse more than to inform, and/or to give permission to various pensions and benefit programmes to give us the lowest possible increase! At the beginning of every year, I look to see what the inflation is supposed to be for the most recent year, and every time I find different numbers on different sites, all of which are supposed to be reputable.
The sites may not have all been updated with the December CPI number.
Even with the December CPI number, there is more than one way to present what happened to prices over the past year.
One could present the change in CPI from the end of the December the previous year to the end of December. That would represent the change in price of the CPI basket from the start of the year to the end of the year.
One could average the twelve monthly CPI numbers for the year to get the average price of the CPI basket over the twelve months. Then, compare that with the average CPI for the year before. Sort of like comparing the average temperature of two years.
If one doesn't like averages, one could calculate the median of the twelve monthly CPI readings for the year to get the median price of the CPI basket over the twelve months. Then, compare that median with the median for the year before. Sort of like comparing the median temperature of two years.
Similar issue in calculating portfolio returns. Internal rate of return and Modified Dietz give slightly different rate of return. Regardless, one still ends up with the same amount of money in the end, though. 
6:18 am
October 21, 2013
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I'm not sure we get the same amount of money from all these CPI calculations though.
And now you know why I find all of this so confusing. I'd just like to know who I'm supposed to believe when I want to know what the inflation rate is.
Please write your comments in the forum.