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Rising Energy Prices Shrink Canadian Purchasing Power

Written by Posted On Tuesday, 26 October 1999 00:00

The loonie -- our once-proud Canadian dollar -- under stress on international money markets, is losing ground in Canada, too. The Canadian dollar shrank from a purchasing power of 92.1 cents in September 1998 to 89.8 cents this September due to rising energy prices.

Statistics Canada reported a 2.6% rise in the Consumer Price Index (CPI) for September which accounts for the drop in purchasing power. This increase follows a 2.1% rise over August 1999.

Rising prices for gasoline, fuel oil and natural gas are driving these increases. Exclude the change in energy prices from CPI calculations and the Index would only have risen 1.5% in August and 1.6% in September.

CPI measures the annual increase for a specific "basket" of goods and services by comparing prices in one month with those in the same month a year ago. The September rise means consumers paid 2.6% more for food, shelter, household operations and furnishings, clothing and footwear, transportation, health and personal care, recreation, education, alcoholic beverages and tobacco, energy and other services. CPI comparisons may also be made month by month throughout a year to reveal patterns of price increases and decreases.

Sometimes the net difference averages out. Manitoba home owners were hit with 5.0% increases in property taxes, compared to a national average of 2.3%. However, Manitoban's benefitted from an isolated 6.4% drop in natural gas prices, compared to an 8.4% increase for Canada as a whole.

Keeping an eye on CPI is part of managing home equity. Rising energy prices mean direct and indirect increased costs for homeowners. The 0.7% increase in shelter costs during September was partly due to higher homeowners' maintenance and repair costs (+3.7%), which, in turn, could be indirectly linked to rising energy costs for manufacturers and distributors.

Since rising energy prices seem the cost culprit, energy-efficient strategies are in the spotlight. Hit the local building supply store and cover the basics: caulk windows and doors, add thermal-efficient windows, add insulation and buy energy-efficient replacement appliances, when possible. Save by using water-saver shower heads, cold water for laundry and any approach that lowers energy consumption. Consider up-grading to a more energy-efficient furnace. These energy-efficient improvements can increase the value of your home.

Savvy Canadian buyers will look for energy-saver features if prices continue to climb. Poorly-insulated homes with inefficient heating systems will be harder to sell.

Canadian real estate has traditionally kept ahead of inflation and given even better returns in specific markets. Investing in energy-saving renovations and equipment may be another way to save money and improve your return on investment, unless you think energy costs will be on a sharp decline soon.

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