Part two of two
B.C.'s cost of living has been unbelievable over the past year.
According to various economic forecasts, B.C.'s inflation rate will be under 1% in 2013. BMO is forecasting no overall increase in the consumer price index (CPI) in B.C.
Although, Doug Porter, chief economist at BMO Capital Markets, concedes, "Try to convince your readers that inflation was zero in 2013."
But the overall cost of living in B.C. has remained flat because overall average declines in home prices in the province and the return to the PST-GST system last spring have offset increases in other aspects of the economy.
According to Statistics Canada, the cost of owning a home in B.C. began to fall in September 2011 and kept declining until levelling off in July 2013. In that time, owned accommodation costs fell 3.5% in B.C.
Meanwhile, the price of restaurant food in B.C. fell 6.2% last April with the end of the harmonized sales tax. While prices have edged up since then, they are still well below HST-era levels.
Prices declined in several other areas of the economy, especially in services like telecommunications that were affected by the HST. But, overall, these declines have been offset by significant increases elsewhere, leading to near flat inflation in the province. Renters, for example, have generally faced higher costs each year, and the cost of groceries or owning a car, while volatile, has also remained higher year over year.
While 2013 may see relatively low inflation, many economists are expecting B.C.'s CPI to rise in 2014. Some of that will be mandated by the government, such as the 28% hike over five years in hydroelectricity rates or the end of TransLink's employer pass program, which will eliminate the 15% discount from posted monthly pass rates for program participants.
But other increases, like rising B.C. housing prices, should be the result of improving economic conditions, which in turn should boost the province's mediocre job gains over the past year.
"The best way to get firmer inflation is to have a firmer global economy," said Porter. "If you start seeing upward pressing on goods prices, employment growth starts to pick up and you get a little wage pressure. At this point, it would not be a bad thing to get some wage pressure." •
