The CPI vs. Reality: Why Your Personal Inflation Rate Feels So Much Higher

How spending habits, shrinkflation, and housing realities create wildly different inflation experiences across Canada

Apr 01, 2026

In this episode of Classosnomics, Sabrina Maddeaux and Mike Moffatt break down how Canada’s inflation rate is actually calculated and why it often does not match what you experience in your daily life. From gas prices and groceries to rent and mortgage costs, some of the most visible and frequently purchased items are rising faster than the official average.

They explore how the Consumer Price Index works, why different households experience inflation differently, and how factors like shrinkflation, quality changes, and spending habits can distort the real picture. They unpack why lower-income Canadians and renters are often hit hardest, while others may feel inflation very differently depending on where they are in the housing market.

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Below is an AI-generated transcript of the Missing Middle podcast, lightly edited.

Sabrina Maddeaux: The Bank of Canada regularly asks Canadians how high they think inflation is, and not surprisingly, on average, they give higher answers than the official inflation rate. Some of this is simply a distrust in government, and that we have a stronger emotional reaction when the price of something goes up than when the price of something goes down. We’re seeing that play out right now with the recent spike in gas prices, but there is more to it than that.

The general public isn’t entirely wrong. Part of it has to do with how we measure inflation. The improvement in the quality of a good is treated the same as a price reduction, when they are two very different things. But it also has to do with how some prices rise faster than others. So the inflation that you experience may differ from my experience.

And that’s not just a housing phenomenon. When the Bank of Canada measures inflation and announces that prices rose 2.5% over the last year, how do they actually come up with that number, Mike?

Mike Moffatt: Well, the short version of it is that they break down household spending, including both goods and services, into hundreds of different categories to create a representative consumer spending basket. They then track the price of each of those individual goods and services, and how those change over time. And that basket is weighted by the average total spending of that good. So cars are given a higher weighting than golf balls.

Now the items and relative weightings are updated from time to time as new products and services are introduced and old ones go extinct. And the prices of the goods and services are adjusted, or at least they try to adjust to take into account both changes in product size and product quality. And all gets thrown into a blender, and we see how those prices change over time. And that gets us the inflation rate.

Sabrina Maddeaux: So two different families are going to have radically different spending habits. Obviously, some may have children who need daycare, others may spend a lot of money traveling or going to restaurants, while others may see most of their paycheck go to the high cost of housing. So, because everyone’s basket of goods and services differs, families will experience inflation very differently.

Do we know which groups are experiencing higher rates of inflation than others?

Mike Moffatt: Well, it really does come down to those spending patterns, as you mentioned. Statistics Canada tracks hundreds of different categories of spending, but they are divided into eight basic categories. Surprisingly, since 2002, housing or what the Consumer Price Index calls shelter. Has actually not experienced the biggest jump in prices. Though that’s partly a quirk of how stats can measure housing inflation. The biggest jumps have been in the alcohol, tobacco and cannabis category, along with the food category.

So on the flip side, the categories of recreation, education and reading have seen relatively modest growth. Clothing and footwear have actually experienced deflation since 2002. That means that prices are lower today than they were back then. So overall, these trends have hurt consumers who spend a larger proportion of their paychecks on food and rent, which, not surprisingly, tends to be lower-income Canadians.

Sabrina Maddeaux: I actually didn’t know reading was a category. I’m just curious, were those books, newspapers and magazines? Because that’s so broad?

Mike Moffatt: Yeah, it is. So it’s books, newspapers, magazines and those prices haven’t gone up nearly as much as other categories. And a lot of that has to do with the fact that there’s a lot of competition. And when it comes to news media, newspapers have had to lower their prices. We’ve had online bookstores create a little bit of competition there. So it shows that market dynamics matter and they affect the rate of inflation that people experience.

Sabrina Maddeaux: Okay, thank you for satisfying the journalist nerd and me.

I would imagine there are large differences within categories. There have been all kinds of headlines lately about the skyrocketing price of beef, for example.

Mike Moffatt: Beef is a terrific example because. Those prices have more than doubled since 2002, while the price of potatoes is only up about 50%. And obviously, it depends on what time period you’re examining.

So, for the last couple of decades, coffee prices have increased at about the same rate as general food inflation. And actually, in many years, they’ve increased more slowly than the typical food category. But last year, in 2025, we saw consumer coffee prices jump by about 30%. And that’s the worst type of inflation of all. It’s the type that affects me!

Sabrina Maddeaux: Now consider someone like you who drinks a lot of coffee, but who isn’t an economist like you and doesn’t follow the data. You go to the supermarket or the local coffee shop, and you see prices are way up. You have to be thinking that inflation is absolutely out of control.

Mike Moffatt: Yeah, that plays a huge role in people’s inflation perceptions. When they see the price of something that they purchase frequently, and those prices have increased a lot. There’s a certain level of salience there.

Gas prices are another one. Most of us pass multiple gas stations every day. And then, unlike most prices in our economy, these are displayed on really large signs. So when gas prices jumped up, it gets noticed, and people believe that’s an economy-wide phenomenon. When gas prices, in particular, go up, inflation perceptions go up faster than actual inflation.

So when it comes to inflation perceptions, some prices matter more than others. And when it’s good, you purchase a lot of it. Like if you’re somebody who drives a lot, it also means that your personal rate of inflation is probably higher than the rest of the economy.

Sabrina Maddeaux: I do know when my fiancé and I drive past gas stations, we always comment on the price of gas, so that’s very true.

Now, you mentioned earlier that Statistics Canada takes into account changes in package sizes. So, when we see shrinkflation at the grocery store, is that taken into account in the inflation data?

Mike Moffatt: Though it is possible that certain examples are missed, for the most part, I think Statistics Canada does a good job of this. They recently reported that from 2021 to 2023, 30% of the grocery items that they track experienced shrinkflation. So I think that says a couple of things. One, they’re aware of it. And two, that shrinkflation is really widespread when, just in a two-year period, 30% of those products or product categories are experiencing shrinkflation.

Sabrina Maddeaux: I’m a big Kraft Dinner fan, and one box used to feed four people when I was growing up. Now one box barely feeds me.

Mike Moffatt: I’m a dad of a growing 11-year-old boy, and sometimes you’re cracking open that second box. So absolutely, that’s a big, big issue, and I think a lot of people have noticed that. That is relatively straightforward for Statistics Canada to measure because on the Kraft dinner box or the coffee container, they have how many grams it is and so on. So they do catch a lot of that. But what’s harder to accurately measure is how the quality of goods changes for both better or worse. So when computers get faster, or smartphones get more features, statistical agencies like StatsCan try to account for that in the data. But where I’m a bit skeptical that StatsCan is accurately capturing changes in quality is when products make subtle changes to reduce quality. Like when food companies reduce the quality of their ingredients instead of raising prices.

Sabrina Maddeaux: Yeah, this is something that seems to happen a lot.

There’s a post on Reddit recently about a mint chocolate ice cream that went from advertising that it has “chocolate pieces”, to stating that it has “chocolaty pieces” because they had taken so much cocoa out of that product, it no longer met the legal requirement to call something chocolate.

Mike Moffatt: Yeah, that’s right. And that’s something that really annoys me as someone who enjoys a good bowl of ice cream. And I’m skeptical of the ability of any statistical agency to properly account for that. Properly account for the fact that you’re no longer getting chocolate in your chocolate ice cream. And I don’t think it’s because statistical agencies are not trying. They do try to account for this, but it’s just really hard to track. And given how common these quality downgrades are, it makes me believe that we may be underestimating the rate of inflation because we’re not adequately capturing how consumers are paying more for products, but they’re actually getting less because these products are worse than they used to be.

Sabrina Maddeaux: I absolutely believe that.

I’m going to talk about cheese again for a second. Kraft Singles, big fan as well. There have been a lot of comments on Reddit about texture changes, how the cheese might melt differently, and differences in flavour, over the years. So it seems like something consumers are noticing, but it’s very hard to get any real transparency into that.

But because this is the Missing Middle, we can’t have an inflation discussion without talking about housing. You mentioned that there’s a shelter component in the CPI that covers housing, but the actual rate of inflation any family is experiencing must be different depending on where they live or whether they’re renters or homeowners. Is that the case?

Mike Moffatt: Yeah, absolutely. There are massive differences. And, the CPI is done at the national level, but it is also done at the provincial and geographic levels. So we do account for that. And it does mean that inflation can be higher in some provinces or some cities in others. But overall, the CPI measures the average family, so it finds that basically the average family owns 70% of a house and rents 30% of one. Which, of course, no actual family does in reality, the same way that nobody has two point three kids. But statistically speaking, that was the average in the 80s.

And as well, the shelter component considers things like water bills, property taxes and so on and not everyone directly pays those either. So there’s a lot of variability within that basket. And even without taking into account those geographic differences, we can split households into four types, and how they experience shelter inflation is vastly different.

The first group is renters, and they have no plan to buy a home soon or ever. So they’re not directly impacted by changes in home prices or mortgage rates. They could be indirectly impacted because it could affect rents, but ultimately, it is the changes in rents that they’re affected by. Not all of these other things.

The second group is your prospective home buyers. And most of them are impacted by rent changes because a lot of them are currently renting, but they’re also negatively impacted when home prices go up, because they’re going to have to pay more to get the house, and they’re also negatively impacted when mortgage rates go up, because once they do get that home, that would make their monthly payments higher than it otherwise would be.

And then you have folks like me, who own a home, but we haven’t fully paid off that mortgage. Unlike the second group, I actually benefit. At least in a financial sense, from home prices and inflation. We’ve already purchased a home. It’s ours now, so if home prices go up 10%, our potential purchasing power actually goes up, not down, because we could borrow against those, untaxed and unrealized capital gains and so on. So that type of price increase doesn’t really affect me in a way that other types of inflation would. It’s actually financially beneficial.

Sabrina Maddeaux: Shocker, Gen X Mike wins again.

Mike Moffatt: Gen X Mike wins again. Well, Gen X was due for a win.

But on the other hand, if mortgage rates go up, we are negatively impacted because you have folks who have variable-rate mortgages, so they get hit right away. Or fixed-rate mortgages, that will eventually renew, in my case, as of January 2027. So I’m okay for a while. But I’m really hoping those rates go down in the next six months or so.

And then finally, you have Boomers and Silent Generation folks like my parents. They own their home. They’ve paid off their mortgage. So rising mortgage rates don’t impact them at all. And it actually means that if other interest rates are going up the same way that mortgage rates are, like the interest paid on savings accounts, that’s a net positive for them.

In my case, interest rates up, that’s bad. For them, interest rates up, that’s good as far as their purchasing power goes.

So, because of shelter inflation, the category has wildly different impacts, depending on where you are in that spectrum of renting and homeownership. Your personal rate of inflation could be much, much higher or much, much lower than what’s reported in the news.

Sabrina Maddeaux: Tracks to the theme that we don’t have one economy anymore, we have multiple, often based on when you were born, where people are experiencing it very differently. And the way our data is reported doesn’t always reflect that.

Thank you so much, everyone, for watching and listening. And thanks to our producer, Meredith Martin and our editor, Sean Foreman.

Mike Moffatt: And if you have any thoughts, questions or advice on somebody who has a mortgage to renew. Please send us an email to [email protected]

Sabrina Maddeaux: And we’ll see you next time.