Over thirty years ago, a Big Mac hamburger cost around $2. Today, it is over triple the price. Throughout that time, average family income has only risen by 91.8 percent, and the Consumer Price Index (CPI), the official measure of inflation, increased by 107 percent, or just 2.2 percent per year.
One of the most pressing questions in financial circles today is whether inflation will become a problem, or if current inflationary pressures are temporary as the central banks would like us to believe. Those who believe inflation may be more pervasive cite various factors that signal a potential shift: significant government stimulus, aging demographics in low-cost manufacturing geographies, and empowered labor that puts upward pressure on wages and prices. Others suggest that inflation won’t be able to maintain its recent pace after struggling to climb for many years, largely attributing it to pandemic-depressed prices.
How has purchasing power really changed? The chart shows the prices for select items in 1987 and today. While prices for many things have gone up, technology has made others more affordable: TVs are not only larger and thinner, but cheaper! What about your personal experience? Statistics Canada has released a personal inflation calculator at: https://www150.statcan.gc.ca/n1/pub/71-607-x/71-607-x2020015-eng.htm
Regardless of the path forward, the good news for investors is that the S&P/TSX Composite Index has gained over 430 percent throughout this time. If history is any indicator, equity markets continue to be a great way to grow funds for the future.
Changes in the Prices of Select Items: 19871 & 2021
|Cdn. Family Income (Avg.)2||$37,118||$71,200 (2019)||+91.8%|
|Cdn. House (Avg.)3||$129,702||$716,000||+452.0%|
|Flat Screen Television4||$1,599 (32”)||$750 (55”)||-53.1%|
|Top Apple Computer5||$9,150||$7,400||-19.1%|
|Microwave4||$580 (680W)||$140 (1100W)||-75.9%|
|Bottle of Dom Perignon6||$85.25||$267.95||+214.3%|
|Big Mac Hamburger7||$2.05||$6.77||+230.2%|
|Consumer Price Index8||67.5||139.6||+106.8%|
|S&P/TSX Composite Index9||3,729.30||20,035.30||+437.2%|
- 1987 data, Report on Business Magazine, Apr. 2012, pg. 13.
- StatCanT-1110019101; Undergrad tuition www150.statcan.gc.ca/n1/daily-quotidien/200921/dq200921b-eng.htm.
- CREA data
- Sony HD TV, bestbuy.ca
- MacPro, apple.ca
- LCBO data
- bankofcanada.ca, accessed 03/21
- At close on 6/7.