Andrew Barclay (StatCan): Measuring Inflation | Rational Reminder 348

Is the government manipulating inflation data? Why do so many people feel like their personal costs are rising faster than official inflation numbers suggest? In this episode of the Rational Reminder Podcast, we dive deep into one of the most debated and misunderstood economic topics: inflation. Today, we are joined by Andrew Barclay, an economist and senior analyst in the Consumer Price Division at Statistics Canada, to discuss everything you need to know about inflation and the Consumer Price Index (CPI). Statistics Canada is Canada’s national statistical agency dedicated to producing accurate, relevant, and timely data to help Canadians better understand their country. In our conversation, we unpack how inflation and the CPI are calculated and why it is so important. We explore the controversy around CPI calculations and the influence of inflation on government benefits, tax brackets, and the overall economy. Andrew also addresses skepticism and conspiracy theories about government inflation reporting, uncovers drivers of the perception gap, and explains how Statistics Canada ensures the accuracy and integrity of its data. Join us to hear the real story behind CPI and inflation with Andrew Barclay!

Timestamps:

0:00:00 Intro
0:06:26 Why it's important for a country like Canada to accurately measure changes in the prices of consumer goods
0:08:24 How the Canadian Consumer Price Index is calculated
0:13:26 How frequently the contents of the CPI basket are updated
0:19:20 Defining quality adjustments
0:23:38 Why some people are skeptical of the use of quality adjustments
0:27:34 How CPI is adjusted during extreme periods of price changes, like COVID-19
0:32:48 Why Canada only reports one CPI measure, as opposed to different measures for different population groups
0:39:16 The difference between the price of a house and the cost of housing
0:41:10 How StatCan calculates the cost of owned housing for the CPI
0:46:57 The benefits and drawbacks of using StatCan’s approach
0:52:05 How well the CPI measure captures perceived inflation from surveys
0:57:02 The main drivers of the inflation perception gap
1:02:50 The importance of housing in explaining the perception gap
1:08:56 What StatCan does to make sure that differences between inflation perception and CPI are not reflective of “real” differences that should be captured by CPI
1:11:49 The indexes that StatCan receives the most criticism for
1:17:35 How StatCan responds to, or incorporates feedback from, that criticism
1:22:52 Andrew defines success in his life

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[AAkCN]

Stuff like this is why I listen to rational reminder. It feels like niche nerd stuff but is so essential and quite interesting. Thanks!

[johnotay]

Thanks for this interview, I know in my online circle the debate about whether government inflation stats are correct or appropriate is a constant. Even for financially literate people I've found that few if any seem to have a complete understanding of how these numbers are produced (I count myself in that group), definitely sharing this around to a number of places hoping it clarifies some long running arguments.

[Rudmin]

Missed opportunity to dig into what people want to know. Has housing always been an asset and not a cost? When did that change. How exactly is the basket chosen? “It’s not chosen” was a terrible answer. How is it calculated? Is it meant to reflect the average of all Canadians or the median or the average ancross all expenditures? Are business expenses excluded from the basket?

[bullmax]

Really interesting episode. Although I am no Canadian, the content is probably very much relevant to my home country as well. Also its nice that we get some insight into the work ethics of public servants, especially in a time where a lot of that is put into question in the US.

[digik]

Thanks for this episode. It was all that and a bag of chips.

[matiasnicolaspizmeny]

Great content. Here in Argentina we have seen a reduction in inflation (10-20 percent monthly a year ago to 2-4 percent now)...

In general polls, people feel that prices are still increasing 10-15 percent MoM

Huge subjective aspect there... I have never thought before this session on how to manage this discrepancies from the publisher's side

[maple.everything]

Does StatCan publish the scanner data? That would be tremendously useful for consumer decision-making.

[singranasbonfireofdreams]

i want to chime in on the quality adjustment laptop example. if a laptop today is twice as expensive as last year, but is 10 times faster, that actually is me paying twice as much for "access" to a laptop in this year as opposed to last year, the reason for this is that software will be as in-efficient as is possible given the computing power of the target consumer of that software. i do not buy the latest nvidia gpu because i feel like i need the twice as powerful gpu, i buy them because i know that since i play games, once those gpus are on the market others will buy them and then the median game i might want to play a few years from now will need the median gpu to play. a similar argument could be made for more expensive cars, the new safety features could be "worth it" for a wealthy enough person, but for a poor person they are forced to pay more for "access" to traveling to work

[mmbarbon]

Could perception be influenced by the huge cost of housing. Is Canada's housing in basket greater than other countries ?

[Dope_Zero]

You recently mentioned a paper about the percentace you should / could have in stocks over time and how does it affect your return / risk. Has this paper been released yet? I couldnt find anything. Thank you for an update!

[vincentli]

Given Cederberg’s paper, what will Canadians do since they don’t have Real Return bonds? Nominal bonds have shown to be ironically more risky by Cederberg. Is a high allocation to equities the answer?

[pauljones]

Dude Statscan needs to figure out why those "communication issues" are happening. An out of touch gov isn't a good look

[JimboJimbo-ii]

Nice to see Tom Segura explain inflation inputs

[singranasbonfireofdreams]

this may be a very bad idea, but i just thought it would be funny if you did an aprils fools every year with the title "irrational reminder" where you address topics and design ways to make interesting sub-optimal investment plans around that topic. try to find a topic where by showing how to do it very badly it can teach why its a bad idea and what to do instead

[ZeProblematicz]

I would enjoy an analysis about the video by Millennial Moron entitled The Problem with CPP Investments