MNI INTERVIEW: True Inflation Trend Hard To Pin Down- StatsCan

Canada's chief statistician told MNI that underlying inflation trends are hard to measure given structural changes in the economy, and no core index perfectly captures the true path of price pressures through shocks over time.

His comments highlight a key question facing Bank of Canada officials considering an overhaul of three measures they've cast doubt on this year, while cutting interest rates as growth slows and some prices remain elevated. 

“To get to the core is really tricky business," Andre Loranger said in an interview. "It's prudent to look at different measures, which is why we work with the Bank to produce the core -- the median, the trim and the common -- because they give different perspectives of what the underlying price trend is.”

Policymakers say next year's framework review will examine what core measures are most robust to structural changes and whether elevated housing prices amount to a distortion. The current three core indexes followed other attempts to capture underlying prices. (See: MNI INTERVIEW: Surge Pricing Mandate Would Aid BOC- Andolfatto)

“To get a deeper understanding I think it’s very useful to look at these other measures,” he said. (See: MNI: Trudeau Deficits, Not BOC, Drove Covid Inflation- CD Howe)

Loranger has long experience looking at inflation having started at the agency in 1997 and working in branches dealing with producer prices and national accounts. The question of finding robust core measures has become more pronounced in a time of shifting global tariffs, supply chains and extreme weather events, he said.

CUTBACKS

Statistics Canada staff have frequent meetings with Bank officials and the chief statistician meets the Governor each year to discuss data quality, but decisions on any revisions to the Bank's preferred measures are up to them, he said. (See: MNI INTERVIEW: Canada Needs More Than One Rate Cut-Ex Dep Lane)

The agency also has a close relationship with U.S. agencies and so far there's no sign of issues related to President Donald Trump's cutbacks and firing of top officials, Loranger said.

“The U.S. organizations are high caliber statistical organizations so I would expect that the quality of their statistics would not suffer,” Loranger said. “Obviously, in times of budget reductions, you have to sort of think about well what is the impact.” 

SEAL OF APPROVAL

Prime Minister Mark Carney also wants program spending cuts of up to 15% and StatsCan has sent in proposals ahead of the Nov. 4 budget, Loranger said. Asked if economic figures would be cut he said “a lot of the economic statistics that we produce are fundamental.”

While StatsCan began publishing flash estimates of monthly GDP and retail sales in recent years it doesn't plan to follow the University of Ottawa and the Chamber of Commerce in creating a growth nowcast, Loranger said.

StatsCan partners with the Chamber on some data issues but it's best for a government agency to avoid its own economic forecasting, he said. "The closer you get to a nowcast estimate, the more you have to rely on modeling, and the more the likelihood is of bigger revisions, which our users really don’t like.”

Another major challenge to public perceptions is a world awash in disinformation, Loranger said, making it important for StatsCan to do better at showing the public its data is trustworthy. “Putting a seal (stating) 'this is a certified number that comes from the Canadian government, from a statistical organization' would be very useful in combatting misinformation.”