Research Documentation
This page provides the complete methodology and sources for The Real Inflation: Why Your Costs Rise Faster Than Official Numbers. All calculations and data sources are documented here for transparency.
Overview of Methodology
The Real Inflation analysis uses a "Household Expenditure Model" to estimate actual inflation experienced by Canadian families from 2000 to 2025. This differs from the Consumer Price Index in two key ways:
- Includes taxes as an expense category. CPI excludes income taxes, payroll taxes, and most property taxes.
- Weights categories based on actual cash outflows. We combine consumption spending from Statistics Canada with total tax burden from the Fraser Institute.
Primary Data Sources
1. Statistics Canada: Survey of Household Spending (SHS) 2023
Source URL: https://www150.statcan.gc.ca/n1/daily-quotidien/250521/dq250521a-eng.htm
Additional data tables: https://www150.statcan.gc.ca/n1/pub/11-627-m/11-627-m2025026-eng.htm
Key data points used:
- Average household spending on goods and services in 2023: $76,750
- Shelter share of spending: 32.1% ($24,640)
- Transportation share: 15.8% ($12,130)
- Food share: 15.7% ($12,050)
- Household operations share: 12% ($9,210)
- Recreation and education share: 10% ($7,680)
- Healthcare share: 6% ($4,600)
- Clothing and footwear share: 4.5% ($3,450)
- Other: 3.9% ($2,990)
Calculation: Total consumption spending = $76,750 per household per year
2. Fraser Institute: Canadian Consumer Tax Index 2024
Source URL: https://www.fraserinstitute.org/studies/canadian-consumer-tax-index-2024
Media coverage with figures: https://www.bnnbloomberg.ca/business/economics/2025/07/22/average-canadian-family-spent-423-of-income-on-taxes-in-2024-study/
Key data points used:
- Average Canadian family total tax bill 2024: $48,306
- Percentage of income: 42.3%
- Historical baseline (1961): 33.5% of income
Tax breakdown (approximate from published data):
- Income taxes, federal and provincial: ~$22,000 (~45%)
- Payroll taxes including CPP/QPP and EI: ~$8,500 (~18%)
- Sales taxes including GST, HST, PST: ~$6,500 (~13%)
- Property taxes: ~$4,100 (~8.5%)
- Other taxes including fuel, health, alcohol, import duties: ~$7,200 (~15%)
Historical tax data from Fraser Institute reports:
| Year | Total Taxes | % of Income | Source |
|---|---|---|---|
| 1961 | $1,675 | 33.5% | Fraser Institute |
| 2000 | ~$24,000 | ~36% | Fraser Institute |
| 2010 | ~$33,000 | ~39% | Fraser Institute |
| 2020 | ~$42,000 | ~41% | Fraser Institute |
| 2024 | $48,306 | 42.3% | Fraser Institute |
Calculation: Tax increase 2000 to 2024: ($48,306 - $24,000) / $24,000 = +101%
3. Bank of Canada: Consumer Price Index Historical Tables
Source URL: https://www.bankofcanada.ca/rates/price-indexes/cpi/
Inflation Calculator: https://www.bankofcanada.ca/rates/related/inflation-calculator/
Key data points used:
- CPI index value in 2000 (base 2002=100): approximately 95-97
- CPI index value in late 2025: approximately 162-165
- Cumulative CPI increase 2000 to 2025: approximately 70-75%
- Annualized CPI rate: approximately 2.2-2.3%
Calculation: Cumulative CPI = (165 - 95) / 95 = ~74% Annualized rate = (1.74)^(1/25) - 1 = ~2.2%
4. Canadian Real Estate Association (CREA): Historical Home Prices
Source URL: https://www.crea.ca/housing-market-stats/national-price-map/
Historical data sources:
- CREA MLS Home Price Index
- National Bank of Canada Housing Affordability Monitor
Key data points used:
- National average home price 2000: approximately $163,000
- National average home price 2025: approximately $680,000-$720,000
Calculation: Home price increase = ($700,000 - $163,000) / $163,000 = +329%
5. Teranet-National Bank House Price Index
Source URL: https://housepriceindex.ca/
Key data points used:
- Confirms national home price trends
- Index shows similar trajectory to CREA data
6. Bank of Canada: Historical Interest Rates
Source URL: https://www.bankofcanada.ca/rates/interest-rates/
Key data points used:
- Average 5-year mortgage rate 2000: approximately 8%
- Average 5-year mortgage rate 2025: approximately 5%
7. CMHC: Rental Market Data
Key data points used:
- National average rent 2000: approximately $650-$700/month
- National average rent 2025: approximately $1,800-$2,000/month
Calculation: Rent increase = ($1,900 - $675) / $675 = ~181%
Basket Weight Calculations
Step 1: Calculate Total Household Outflow
Total household outflow = Consumption spending + Total taxes
- Consumption spending (SHS 2023): $76,750
- Total taxes (Fraser Institute 2024): $48,306
- Total outflow: ~$125,056
Note: This is an approximation. The SHS consumption figure and Fraser Institute tax figure are from different household income definitions. We use them together as the best available data for this model.
Step 2: Calculate Category Weights in Combined Basket
Each category weight = Category amount / Total outflow
| Category | Amount | Weight Calculation | Final Weight |
|---|---|---|---|
| Total Taxes | $48,306 | $48,306 / $125,056 | 38.6% |
| Shelter | $24,640 | $24,640 / $125,056 | 19.7% |
| Transportation | $12,130 | $12,130 / $125,056 | 9.7% |
| Food | $12,050 | $12,050 / $125,056 | 9.6% |
| Household operations | $9,210 | $9,210 / $125,056 | 7.4% |
| Recreation and education | $7,680 | $7,680 / $125,056 | 6.1% |
| Healthcare | $4,600 | $4,600 / $125,056 | 3.7% |
| Clothing and footwear | $3,450 | $3,450 / $125,056 | 2.8% |
| Other | $2,990 | $2,990 / $125,056 | 2.4% |
| Total | $125,056 | 100% |
Category Inflation Calculations
Taxes: +100 to 120% (2000 to 2025)
Data source: Fraser Institute Canadian Consumer Tax Index
Calculation:
- Total taxes 2000: ~$24,000
- Total taxes 2024: $48,306
- Increase: ($48,306 - $24,000) / $24,000 = +101%
We use a range of +100 to 120% to account for data estimation and the 2024-2025 gap.
Shelter: +180 to 220% (2000 to 2025)
Data sources: CREA, Teranet-National Bank HPI, Bank of Canada, CMHC
For homeowners with mortgages:
Mortgage payment calculation uses standard amortization formula:
Monthly payment = P × [r(1+r)^n] / [(1+r)^n - 1]
Where:
- P = Principal (loan amount)
- r = Monthly interest rate
- n = Number of payments
2000 scenario:
- Home price: $163,000
- Down payment (10%): $16,300
- Mortgage principal: $146,700
- Interest rate: 8% (monthly r = 0.00667)
- Amortization: 25 years (n = 300)
- Monthly payment = $146,700 × [0.00667(1.00667)^300] / [(1.00667)^300 - 1]
- Monthly payment ≈ $1,130
2025 scenario:
- Home price: $700,000
- Down payment (10%): $70,000
- Mortgage principal: $630,000
- Interest rate: 5% (monthly r = 0.00417)
- Amortization: 25 years (n = 300)
- Monthly payment = $630,000 × [0.00417(1.00417)^300] / [(1.00417)^300 - 1]
- Monthly payment ≈ $3,680
Mortgage payment increase: ($3,680 - $1,130) / $1,130 = +226%
For renters:
- Rent 2000: ~$675/month
- Rent 2025: ~$1,900/month
- Increase: ($1,900 - $675) / $675 = +181%
Blended estimate: Using a 50/50 blend of owner and renter increases: (226% + 181%) / 2 = ~204%
We use a range of +180 to 220% to account for regional variation.
Food: +90 to 110% (2000 to 2025)
Data sources: Statistics Canada food price data, CPI food component
CPI food component: According to Bank of Canada data, food prices have increased approximately 80-100% based on CPI measurement.
Adjustment for shrinkflation and quality: We add 10-20% to account for package size reductions and quality changes not captured in CPI.
Estimated food inflation: +90 to 110%
Transportation: +100 to 130% (2000 to 2025)
Data sources: Statistics Canada, Insurance Bureau of Canada
Components:
- Gasoline: $0.65/L in 2000 to $1.50/L in 2025 = +131%
- Auto insurance: Increased approximately 80-150% depending on province
- Vehicle prices: Increased approximately 50-80%
- Maintenance and repairs: Increased approximately 80-120%
Weighted estimate: +100 to 130%
Healthcare (out-of-pocket): +80 to 150% (2000 to 2025)
Data sources: Canadian Institute for Health Information (CIHI), industry data
CIHI source: https://www.cihi.ca/en/national-health-expenditure-trends
Components:
- Private health insurance premiums: Increased approximately 100-150%
- Dental care: Increased approximately 80-120%
- Vision care: Increased approximately 60-100%
- Prescription drugs (out-of-pocket): Variable, ~50-100%
Weighted estimate: +80 to 150%
Household Operations: +60 to 80% (2000 to 2025)
Data sources: Statistics Canada, utility data
Components:
- Electricity rates: Increased approximately 80-150% depending on province
- Natural gas: Variable, ~40-80%
- Communications (internet, phone): Some deflation in per-unit cost, but higher usage
- Home maintenance services: Increased approximately 80-120%
Weighted estimate: +60 to 80%
Recreation and Education: +80 to 120% (2000 to 2025)
Data sources: Statistics Canada, university tuition data
Components:
- University tuition: Increased approximately 100-150%
- Recreation services: Increased approximately 60-100%
- Electronics: Deflation in many categories
- Sports and entertainment: Increased approximately 80-120%
Weighted estimate: +80 to 120%
Clothing and Other: +30 to 50% (2000 to 2025)
Data sources: Statistics Canada CPI clothing component
Notes:
- Clothing has seen lower inflation due to globalization and imports
- CPI clothing component shows approximately 20-40% increase
- We add margin for quality changes
Weighted estimate: +30 to 50%
Weighted Total Inflation Calculation
Formula: Weighted inflation = Sum of (Category weight × Category inflation)
Calculation using midpoint estimates:
| Category | Weight | Midpoint Inflation | Contribution |
|---|---|---|---|
| Taxes | 38.6% | 110% | 42.5% |
| Shelter | 19.7% | 200% | 39.4% |
| Food | 9.6% | 100% | 9.6% |
| Transportation | 9.7% | 115% | 11.2% |
| Healthcare | 3.7% | 115% | 4.3% |
| Household ops | 7.4% | 70% | 5.2% |
| Recreation/education | 6.1% | 100% | 6.1% |
| Clothing/other | 5.2% | 40% | 2.1% |
| Total | 100% | ~120% |
Result: Cumulative felt inflation of approximately 110 to 130% (using ranges)
Annualized calculation: Annualized rate = (1 + cumulative)^(1/25) - 1 = (1 + 1.20)^(1/25) - 1 = (2.20)^(0.04) - 1 = ~3.2%
Purchasing Power Comparison
Methodology: Calculate what 2000 values would be in 2025 under CPI indexing vs felt inflation indexing.
Formula: 2025 value = 2000 value × (1 + cumulative inflation)
Average salary calculation:
- 2000 average salary: ~$32,000 (Statistics Canada)
- CPI-indexed 2025: $32,000 × 1.75 = $56,000
- Felt inflation-indexed 2025: $32,000 × 2.20 = $70,400
- Gap: $70,400 - $56,000 = -$14,400/year
OAS calculation:
- Max monthly OAS 2000: ~$420
- CPI-indexed 2025: $420 × 1.75 = $735
- Felt inflation-indexed 2025: $420 × 2.20 = $924
- Gap: $924 - $735 = -$189/month
QPP calculation:
- Max monthly QPP 2000: ~$760
- CPI-indexed 2025: $760 × 1.75 = $1,330
- Felt inflation-indexed 2025: $760 × 2.20 = $1,672
- Gap: $1,672 - $1,330 = -$342/month
Limitations and Caveats
Data Limitations
Household definition varies. Statistics Canada SHS and Fraser Institute use slightly different household definitions.
Tax data includes all taxes. The Fraser Institute figure includes taxes embedded in prices (like import duties) which may double-count some costs.
Regional variation. National averages mask significant provincial differences. Ontario and BC typically have higher shelter costs. Quebec has higher provincial taxes.
Income level variation. Tax burden and spending patterns vary significantly by income level. Our model uses average figures.
Family composition. Households with children have different spending patterns than singles or couples without children.
Methodological Limitations
Category inflation estimates. For categories without precise historical data, we use ranges based on available evidence.
Weighting approach. Using 2023/2024 weights applied to 2000-2025 changes assumes weights were similar throughout the period.
50/50 owner/renter blend. Actual ownership rates have changed over time.
Excludes savings and debt. Our model tracks cash outflows, not wealth accumulation or debt.
What This Model Is
This is an illustrative model designed to show that inflation as experienced by households differs from official CPI. It is not a precise measurement. It uses the best available public data to construct an alternative view of cost increases.
What This Model Is Not
This is not:
- A prediction of future inflation
- A personalized analysis for any specific household
- A substitute for professional financial advice
- An official or academic measurement
Document History
- 2026-01-22: Initial version created
- Data sources accessed January 2026
- All calculations performed using publicly available data