Volume 5, Number 3

March 1992

INFLATION: How the Cost of Living is Reported on the Nightly News

Every month Statistics Canada publishes a document called the Canadian Economic Observer. In it are summaries of the composite index, retail sales, money supply, the labour market, GDP, consumer price index and other economic indicators. Essentially, the document provides a regular check on the typical indicators that professionals use to describe how the economy is doing.

These statistics are made available to the media and the numbers the media cite usually come from this source. Since this document is regularly published it is interesting to ask: when do journalists report the figures? In particular, when do these statistics warrant television attention?

In 1974, when inflation hit 10.8 percent it received much public concern and media scrutiny. The Conservative party fought the 1974 federal election campaign with the slogan: "The issue is inflation, and the problem is leadership." [Irvine, William (1975) "An Overview of the 1974 Federal Election in Canada" in Penniman, Howard, ed. Canada at the Polls: The General Election of 1974 (American Enterprise Institute for Public Policy Research: Washington), p. 274.] Similarly, in the early 1980s when the inflation rate was at 12.4 percent, it caused great concern and uncertainty. At the time of writing the inflation rate stands at 1.3 percent. Does this low rate make inflation more or less newsworthy than the double-digit rates in the early 1980s?

This is one of the questions we will be asking in this second of a three part series on how television reports economic news and economic indicators. In this issue, we focus on the reporting of inflation and inflation's role in the Canadian economy.

ATTENTION TO INFLATION PEAKS DURING INCREASES

Figure A shows the amount of coverage that inflation received between the middle of 1988 and the first quarter in 1992, compared to the inflation rate for that time period.

Click here to view Figure A: Attention to Inflation over Time

On a quarterly basis, increases in the inflation rate received more attention than decreases in the inflation rate. When the inflation rate decreased, even if the decrease was greater than a previous increase, the networks gave less coverage to the decrease than the increase.

In 1991 and 1992, the consistent and dramatic decreases in the rate of inflation did not receive as much attention as the slight upward fluctuations in 1990. When the inflation rate went down in the fourth quarter in 1990, CBC barely gave it any notice--just 4 percent of total inflation coverage. In contrast, CTV gave it 10 percent of its overall coverage of reports on inflation. However, when the inflation rate increased in the next quarter by almost two percentage points, both networks increased their attention to inflation by highlighting this change. Again, CTV provided this increase with more attention than CBC (16 and 5 percent, respectively of total coverage). In contrast, when the rate fell one year later by more than two percentage points, both networks gave this decrease less attention than they gave the increase in inflation one year earlier.

This finding differs somewhat from how the networks reported unemployment. In that study, it appeared that dramatic change was the catalyst for increased television attention. However, during the four years of this study the inflation rate had its most dramatic changes when the rate went down. This indicates that the negative direction in the rate is more important to television news decision-makers than change. If the indicator changes slightly in a negative direction it will probably receive more attention than a large change in a positive direction.

ATTENTION TO INCREASES DOES NOT ACCURATELY REFLECT REALITY

Inflation decreased more often than it increased during this study's time frame. Statistics Canada reported increases in the inflation rate 38 percent of the time. Decreases in the rate comprised 44 percent of the changes. The remaining 18 percent consisted of times when the rate remained unchanged.

Television's attention to the change in the rate of inflation over-emphasized the increases and de-emphasized the decreases. Sixty-two percent of CBC and 71 percent of CTV's coverage focused on instances when the rate went up. In contrast, attention to the greater number of decreases comprised only 30 percent of CBC and 27 percent of CTV's attention to inflation. The remainder of statements were reported when the rate stayed constant.

Click here to view Figure B: TV Coverage of Inflation Compared to Real World Changes

NETWORKS AGREE: INFLATION INCREASING IS BAD FOR ECONOMY

During 1988 and 1989 when the inflation rate was hovering between 4 and 5 percent, the networks reported how these levels of inflation were bad for the economy. Of statements describing inflation, one-third of CBC and almost one-third of CTV coverage was neutral. Of the remainder, almost 9 in 10 statements on both networks provided unfavourable attention to the increase in

"As soon as the stock market heard inflation was up, stock prices went straight down.... Rising inflation and higher oil prices make investors nervous."

the inflation rate. For example, on 17 March 1989 the inflation rate rose from 4.3 percent to 4.6 percent. CTV's Fred Langdon provided this analysis for the change: "As soon as the stock market heard inflation was up, stock prices went straight down. Toronto fell by 37 points, about one percent, and in New York the Dow Jones took its biggest dip in almost a year. Rising inflation and higher oil prices make investors nervous."

Similarly, on CBC's newscast of the same day, Keith Boag reported: "It's a North American problem. Inflation figures released in the U.S. today were the highest in eight years. And that sent shock waves through the stock markets. Stock prices fell in anticipation of a slower economy. There are growing fears of double-digit inflation."

As figure C illustrates, the focus on inflation at this time was to report the increase in individual prices, the rate itself and the role of interest rates in the inflation rate. CTV also emphasized the role of government spending.

Click here to view Figure C: Commentary on Increasing Inflation

INFLATION DOWN: BAD NEWS?

Not only did stories on the decreasing inflation rate receive less attention than those on the increasing rate, but the news of rate decreases received predominantly negative attention.

Over one-quarter of CBC and over one-third of CTV statements on the decrease in inflation were neutral. For example, on the 22 January 1991 "National," Peter Mansbridge reported: "Here at home the cost of living went down last month by a tenth of a percentage point. The annual rate of inflation stands at 5 percent. The price of gasoline, food and clothing all came down."

Of the remaining statements, the networks gave almost twice as many unfavourable as favourable assessments. What is significant about these results is that CBC would start the story with positive news about the inflation rate lowering. However, the bulk of the

"In spite of all the sales, consumers just aren't buying much."

story would have a sombre spin on the day's news. For example, on 18 October 1991, Knowlton Nash reported the lowest inflation rate in the year. In that story, Keith Boag stated: "...prices are levelling off, inflation is in check, and those who have influence over the economy believe the figures released today are not a flash in the pan." He then added: "But while declining inflation is good news in itself, it is not evidence the economy is in good shape overall." The remainder of the story focused on problems in the manufacturing sector, the labour market and demands by unions for higher salaries.

In other cases, reporters contradicted the decrease in the rate with other information. For example, on 20 April 1990, CBC's Der Hoi-Yin reported: "Even though the rate of inflation dipped slightly, housing, clothing, gasoline, in

fact the price of virtually everything continued to rise in March. News that the cost of living is still steaming ahead, coupled with yesterday's rise in the Bank of Canada rate, prompted the major chartered banks to jack their prime interest rates up today."

On 15 November 1991 Knowlton Nash reported that the inflation rate "tumbled to its lowest level in more than a year." This time Der Hoi-Yin blamed the decrease on the lack of consumer spending: "In spite of all the sales, consumers just aren't buying much. And that's the main reason why inflation, the price of goods and services keeps coming down." She quoted Joshua Mendelsoln, the vice-president of CIBC saying: "The decline shows in good part just how weak this economy is." Then Der Hoi-Yin added: "It is so weak, this car dealer has been resorting to all sorts of gimmicks to lure in customers."

On this day, CBC was not the only network guilty of hyperbole. CTV also reported that the drop in inflation was "because the economy is in such bad shape." Lloyd Robertson quoted unnamed experts as saying: "it shows the economy is weak or even dead."

The difference between the two stories was that CTV interviewed its business editor, David Stewart Patterson, who explained why lowered inflation was a positive event.

In other cases, the networks uncritically accepted politicians' negative assessments of low inflation. For example, on the 9 January 1992 "National" Bob Rae made the low inflation rate seem like it was synonymous with low growth. Paul Adams introduced Rae's statement by saying: "When Bob Rae goes on TV later this month, it'll be to deliver the bad news." A clip of Rae was then used: "...inflation dropping like a stone, our revenues having dropped like a boulder..."

Inflation Down but Unemployment Up

Other negative assessments of the decline in the inflation rate were made in reference to unemployment. The networks consistently promoted the theme that the tradeoff for low inflation is high unemployment.

Thirteen percent of CBC and 5 percent of CTV coverage on the inflation rate declining referred to unemployment. Almost one-quarter of CBC and almost half of CTV coverage was neutral. Of the remainder, nine in ten CBC and all of CTV assessments were unfavourable.

Click here to view Figure D: Commentary on Decreasing Inflation

For example, on 21 February 1992 when the inflation rate hit the lowest level in 21 years, Lloyd Robertson stated: "Economists attribute the low rate to the weakness in the economy and the fact the G.S.T. is now more than a year old and no longer figures in comparisons from one year to the next. With me on this subject is CTV business editor David Stewart Patterson. David, for the average person, is this news on inflation cause for celebration?" Patterson's response was: "It's only a cause for celebration if you've still got a job." Later in the story he reiterated the link with unemployment by concluding: "...it's taken a million and a half unemployed to bring the inflation rate down to where it is now. It doesn't look like we're going to see thousands of jobs created tomorrow. So as long as unemployment stays high, low inflation is likely to stick around as well."

Similarly, on 16 August 1991 when the inflation was down half a percentage point from the month before, CBC's Keith Boag reported: "Liberal Finance critic Herb Gray pulled out a different statistic to play down the good news about inflation." Gray then stated: "The unemployment rate went up, and then it stalled last month--10.5 percent, and for one-and-a-half-million Canadians the recession is not over, and the economy is not restored to health, whatever there is with the inflation figures, until all those people are back to work at good, decent full-time jobs."

While it is true in part that as inflation decreases, there may be short term increases in unemployment, [See for example, Friedman, Milton and Rose Friedman (1984) Tyranny of the Status Quo (New York: Harcourt Brace Jovanovich), p. 109; and Block, Walter and Michael Walker (1988) "Entropy in the Canadian Economics Profession? Sampling consensus on the major issues," Canadian Public Policy, vol. XIV, No. 2, pp. 137-150.]  only the federal government presented the view that with lower inflation there is price stability and lowered unemployment in the long term. Although this is the majority view of professional economists, this view was unrepresented in the views of the sources interviewed on the national newscasts.

In some cases it appeared that television emphasized the negative results at the expense of downplaying or ignoring legitimate positive economic news. On 11 October 1991, the International Monetary Fund said Canada would lead the way in growth for 1992 and that the inflation rate would fall below three percent. This news warranted only a brief mention on CBC and was buried as the ninth story of the day. In contrast, CTV placed the IMF report second in the newscast and featured it in an interview with Lloyd Atkinson from the Bank of Montreal. Despite the fact that Sandie Rinaldo introduced the story as being good news, the report was overwhelmingly negative in tone.

Sandie Rinaldo: And taking everything altogether, what does all of this mean to the consumer?

Lloyd Atkinson: Well, it means, basically, that income to the consumer, to the workforce, is not likely to be growing very strongly; and therefore, that is not going to underpin much strength in consumer spending overall. I'm afraid we're going to be in this for a while longer.

Sandie Rinaldo: So we're not to take heart from all of this, at this stage, the recession is not over.

Lloyd Atkinson: Well, I think the recession is over. But it's simply that, during this recovery, we're seeing still a lot of signs of difficulty and it's going to be a weak one, I'm afraid.

GOVERNMENT POLICY UNDER ATTACK

The common theme on TV news in reporting increases and decreases in the inflation rate was criticism of government policy. During periods of increases in the inflation rate, neutral assessments of the government policy comprised 10 percent of CBC and 15 percent of CTV attention. Of the remainder over half of CBC and slightly over half of CTV assessments were unfavourable towards the government's policy on inflation.

Click here to view Figure E: Assessment of Government when Inflation Increases

The government was criticized on two counts: taxes and the Bank of Canada's high interest rate policy. In 1991, the increase in inflation was attributed to the introduction of the Goods and Services Tax (G.S.T.). For example, on 22 February 1992, CTV's Lloyd Robertson reported: "Canada's inflation rate jumped 2.6 percent in January during the first month of the goods and services tax. The price hikes brought the annual inflation rate to 6.8 percent, the highest point in nearly eight years. One economist says January's rate was the highest monthly increase in inflation since 1933."

In 1989, federal and provincial taxes were blamed for the increase in prices. For example, on 14 July 1989 Bill Casey reported on CBC: "But now it appears Wilson has not only been fighting inflation, he's been fuelling it as well...according to Statistics Canada, federal and provincial taxes are the main reason."

Bank of Canada Blamed for Pursuing High Interest Rate Policy

In February 1991, the federal government outlined its policy and targets for reducing inflation and establishing price stability in Canada. The Bank of Canada Review in March 1991 provided arguments in favour of such a policy.

The cornerstone of the Bank of Canada's low-inflation policy was that "citizens need to have confidence that the money they use will hold its value." Throughout 1991 and into 1992, John Crow, the Governor of the Bank of Canada, outlined and reiterated the need for low inflation. He pointed out how high inflation creates uncertainty about the future leading to high unemployment and high interest rates. Crow was explaining in simple terms what economists have researched for the past forty years. It is people's anticipation of how variable government policy will be, which helps determine economic activity.

None of these policy statements were included in any of the stories on inflation. Instead there was criticism that the Bank of Canada policy was in fact a high interest rate policy.

For example, on 15 December 1989 CBC's Knowlton Nash stated: "In spite of the Bank of Canada's high interest rate policy, inflation is continuing to rise...In theory, higher interest rates will make it more attractive for people to save rather than spend money and, therefore, keep inflation down. The problem is, it doesn't seem to be working." The story was concluded by Der Hoi-Yin saying: "The slight rise in inflation reported today just goes to show that high interest rates aren't working. If the Bank of Canada really wants to wring inflation out of the system, it will have to drive interest rates even higher, but that might create such a slow-down that it could send the economy sliding into a recession." Similarly, on the 16 February 1990 "CTV News" Larry Stout reported: "And higher interest rates, the very vehicle the government says it's using to beat inflation, have actually made all sorts of goods and services more costly."

According to John Crow, however, the Bank of Canada Policy is in fact a low-interest rate policy: "We reject, for example, the view that our policy is a high interest rate policy. It's a low interest rate policy when seen over the right time horizon and in the proper perspective. And we are beginning to show how and why it's a low interest rate policy." [Crow, John (1992) "Policy and prospects," Fraser Forum, June 1992, p. 7.]

Not only was the Bank of Canada charged with having a high-interest rate policy, but opposition critics continually asked for lower interest rates to boost the economy. For example, on the 14 April 1989 "National" Doug Young, the Liberal Association Finance critic warned, "The Bank of Canada will have absolutely no alternative but to reduce interest rates because anything else would be catastrophic."

Other criticisms of the policy became personal, attacking John Crow himself. CTV reported on 18 October 1990 that an NDP critic "asked Crow if he was having trouble sleeping at night."

Government Blamed for Causing Recession

Probably the most extreme criticism was the allegation that the federal government was deliberately forcing a recession. For example, on the 5 March 1992 "CTV News," Glen Clark, British Columbia's finance minister stated: "Well, it's just really scandalous, really, that the federal government would act this way to prop up the Canadian dollar. From British Columbia's perspective, we need a lower dollar to make our exports more competitive. They're acting out of some kind of ideological drive to keep the economy in recession, to keep the interest, ah... inflation rate down. And it's just not good public policy."

While one can understand comments from provincial governments criticising the federal government policy, in one case, one of the government's own members made a similar allegation. On the 14 September 1989 "National," Keith Boag reported: "The Chairman of the Parliamentary Committee on Finance has said for months that the Bank of Canada should ease off interest rates. Today, Don Blenkarn accused Bank Governor Crow of deliberately trying to force a recession. He said it was time Crow went." The Conservative back-bencher was then quoted: "You put people in bankruptcy and people in receivership, and eventually you create massive unemployment, and you drive wage rates down with that kind of action. And if that's the intent then I think we ought to replace the governor."

Not only were politicians blaming the government's interest rate policy, reporters also claimed the government caused the recession. For example, on 22 February 1991, CTV's Peter Murphy said: "His (John Crow's) high interest rate policy designed to push inflation down to zero, threw the country into the recession." If that were the case, did John Crow's monetary policy also cause the world-wide recession?

It should be noted that at a time when the government was receiving the most criticism for its monetary policy, it was also receiving the least amount of popular support of the three major parties. When an incumbent government has only 13 percent popular support, the credibility of their message is undermined by only having dissenting views appear on the news. [Bozinoff, Lorne and Peter MacIntosh (1991) "Little Change In National Party Standings," August 22, The Gallup Report.] However, as we have noted previously, the majority of economists would have supported the government's monetary policy.

Decline in Inflation Not Attributed to Government Policy

When the inflation rate decreased the Bank of Canada's monetary policy was not applauded. For the most part the role of the government was ignored. References to the government when the inflation rate decreased comprised only one-quarter of CBC and less than one-quarter of CTV's attention to the government. Instead, the nightly news focused on weakness in the economy. For example on 18 October 1991, CTV reported: "Economists say falling inflation and interest rates show just how weak our economy really is."

Click here to view Figure F: Assessment of Government When Inflation Decreases

METHODOLOGY

Results on Inflation are based on census samples of 41 "National," and 29 "CTV National News" stories from June 1, 1988 to March 31, 1992. All stories appearing during that time were coded, representing a total population rather than a random sample of stories.

Three researchers were employed in coding the news stories. The researchers were selected on the basis of their differing political views. To assess the clarity of the research instrument and measure consistency, tests of inter-coder reliability were conducted throughout the procedure. A high level of intercoder reliability (0.88) was obtained.

Further information or details on the coding design and methods may be obtained by contacting the National Media Archive.

info@fraserinstitute.ca You can contact us at the above email address for any comments or information requests. Please report any dead links or technical problems.

If you know someone who would be interested in this web page, please enter their email address below, and we will forward this URL to them: Email Address:

Last Modified: Wednesday, October 20, 1999.