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Consumer Price Index (CPI) is a measure of the rate of price change for goods and services bought by consumers. It is the most widely used indicator of prices changes in Alberta and impacts all properties and communities.
Condominium Boards and Investment Owners should be proactive in their approach to CPI. Magnum York’s averaged CPI percentage is recommended to use when budgeting for things like year-over-year costs and forecasted Reserve Fund capital expenses.
“Those who fail to plan, plan to fail”
To view Magnum York’s recommendation for CPI planning and budgeting purposes, visit our calculation here: https://introducing.magnumyork.com/CPI
Post lockdown inflation has impacted the prices of nearly all goods and services in Canada. Inflation pressures stemmed from a combination of widespread global supply chain constraints and pent-up consumer demand as the economy reopened.
For example, consumers of natural gas in Canada paid on average 16.1% more than they did a year earlier, as limited supply led to higher prices. Natural gas prices rose 23.9% in Alberta compared with a year earlier.
(Source: https://www150.statcan.gc.ca/n1/daily-quotidien/220119/dq220119b-eng.htm)
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How is CPI used?
CPI is an economic indicator and is most widely used to measure inflation. The rise in the general level of prices often expressed as a percentage, means that a unit of currency effectively buys less than it did in prior periods. CPI is used to make informed decisions about price changes and increases, to budget accordingly.
How should we calculate CPI?
Magnum York calculates the average of the trailing 12 months of CPI as the current “averaged CPI percentage”. To view the Magnum York calculation, visit here: https://introducing.magnumyork.com/CPI.
Magnum York’s 12-Month Trailer Calculation is a fair approach to data based on Government sources which can be found here: https://economicdashboard.alberta.ca/ConsumerPriceIndexChange.
Magnum York’s calculation of “averaged CPI%” for Board Planning changes every month, of course. It’s updated around the 15th based on the prior 12 months CPI % changes.
Why is it important to monitor CPI?
CPI is a measure of price changes and inflation. It is important to monitor CPI changes to ensure Boards review their annual budgets and make the cost of living adjustments needed. By providing a percentage guide, Boards can be proactive in making these adjustments to ensure there are no surprises from increases in goods and services over the year.
While we wish CPI And inflation didn’t exist, it’s best not to ignore the potential impact.
Magnum York recommends implementing CPI increases as Condominium Corporations and Investment Owners review their annual budgets.
Further Resources:
- Magnum York’s Averaged CPI Percentage Calculation: https://introducing.magnumyork.com/CPI
- General Information about CPI and Inflation: https://www.bankofcanada.ca/2021/05/understanding-consumer-price-index/#:~:text=How%20the%20CPI%20measures%20inflation,2020%20compared%20with%20March%202019
- Governemnt of Canada CPI on CPI: https://www.statcan.gc.ca/en/subjects-start/prices_and_price_indexes/consumer_price_indexes
- Alberta CPI Calculation Graph: https://economicdashboard.alberta.ca/ConsumerPriceIndexChange
- https://www.investopedia.com/terms/c/consumerpriceindex.asp
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