Actual CPI in 2013 and implications for PMPRB price compliance
Statistic Canada has released the final Consumer Price Index (CPI) figure for 2013 with full year annual inflation as measured by CPI increasing by 0.9% over 2012. For PMPRB price compliance, this is important for two reasons. First, this is the second year running that the PMPRB forecast CPI (relying on Federal budget estimates) has over-estimated the actual CPI. Moreover, PMPRB have likely over-estimated 2014 CPI at 2% (Bank of Canada estimates project ~1.3% CPI for 2014). While PMPRB price compliance is effectively based on the PMPRB forecasts, the over-estimate in a given year reduces the room available for price increases in future periods. Second, beginning 2015 PMPRB will use a lagged CPI such that price increases allowed in 2015 will assume that inflation for CPI is based on the actual CPI two years earlier (i.e., 2013), which we now know to be 0.9%. Combined, the past over estimates (for 2012, 13, 14) and the low CPI for 2015 (based on 2013 actual) indicate that PMPRB allowable price increases in 2015 will be limited to approximately 0.2% with the potential for a price decrease (for products priced at PMPRB maximum in 2014) if inflation in 2014 is the same or less than 2013 (i.e., 0.9%).
For further information on the PMPRB CPI methodology, please contact Neil Palmer (Neil.Palmer@pdci.ca) at PDCI Market Access Inc.