Source: The Canadian Press

Statistics Canada is taking a closer look at some of the country’s favourite vices to see if they’re being given enough weight in the agency’s monthly inflation numbers.

The Consumer Price Index, a much-watched figure that drives wage increases and economic policy, may underplay just how much booze and tobacco ordinary Canadians are buying.

An international comparison, for example, shows that inflation yardsticks in Britain, Australia, Ireland and other countries give a bigger share to alcohol purchases than Canada does.

And domestic surveys suggest Canadians under-report their consumption of recreational substances that have a social stigma or are illegal, such as marijuana.

The review of vices is part of a major overhaul of the Consumer Price Index or CPI, which the agency expects to have in place for its May inflation report next year.

The painstaking exercise, undertaken every four years, is aimed at ensuring each of the 168 categories in the monthly basket of goods and services is given a weight that matches how ordinary Canadian households divvy up their own budgets.

Internal documents charting the progress of the latest overhaul were obtained by The Canadian Press under the Access to Information Act.

As recently as this fall, Statistics Canada was contemplating a United Nations standard that, among others things, monitors monthly price changes for prostitutes, cocaine and gambling — none of which are captured by Canada’s current Consumer Price Index.

The proposal to adopt the UN standard, outlined in an Oct. 27 internal paper, was rejected this time around as being too difficult and impractical.

“More research and user consultation is necessary before deciding to what extent the … standard should be adopted,” agency official Ron Morency said in response to questions.

But the Canadian vices that are already being recorded will be reviewed.

“There remains a possibility that the consumption of less socially acceptable products, in particular alcohol and cigarettes, is under-reported,” Morency, chief of CPI production, said in an email.

“We will look at ways to reliably identify and estimate this phenomenon and, in the event that a bias is found, the merits of taking corrective actions.”

An internal Statistics Canada chart shows that Canada’s alcohol weighting, for both store-bought booze and drinks served in bars and pubs, is 1.7% of the monthly household budget.

That compares with 5.1% for Australia, 4.1% for Ireland and 6.7% for the United Kingdom. Canada’s weighting, however, is higher than the 1% used by the United States, a country in which alcohol taxes tend to be lower.

Meanwhile, the agency has already decided to toss some new items into the inflation basket to reflect Canadians’ continuing love affair with electronics.

Smart phones and iPads, for example, make their basket debut next month, joining the recent additions of Blu-Ray DVD players and flat screen TVs.

Other goods and services are still under review. The current index, for example, includes no imported or micro-brewery suds. And the bread category does not currently measure the fluctuating price of pita, the flat Middle Eastern bread that’s appearing in more Canadian pantries.

The panel in charge of the overhaul is also grappling with whether to include variable-rate mortgages, legal fees and even the cost of funerals as part of the monthly sampling.

The Consumer Price Index is one of Canada’s oldest statistical measures, dating back to 1914. Each year, more than 650,000 prices are checked for about 600 items — most of them measured monthly by a small army of price-checkers who visit major retail outlets.

The last overhaul of the basket of goods and services was completed in time for the May 2007 index number.