Canadian Producer Prices Dissected
July 30, 2008
Producer price inflation in June stemmed entirely from either higher oil prices or a softer Canadian dollar. Total producer prices went up 1.3% between May and June. 0.7 percentage points of that increase was attributable to oil and coal, which increased 6.1%, and another 0.5 ppts stemmed from C-dollar depreciation. PPI inflation in the year to June was also augmented greatly by higher oil prices but in this case reduced by a stronger C-dollar. Oil lifted inflation by 5.0 ppts, while exchange rate movement mitigated the pace by 1.3%. If neither oil prices nor the Canadian dollar had moved either monthly or on a yearly basis, Canadian producer prices would have risen 0.1% m/m and 2.7% y/y. As it is, the PPI increased 1.3% m/m and 5.4% y/y.
Canada’s index of raw material prices recorded an accelerated monthly leap of 4.4% in June, which lifted its 12-month increase to 31.9% from 27.1%. Prices for mineral fuels rose 8.4% and 76.8% between June 2007 and June 2008. Not including mineral fuels, the raw material price index would have dropped in both monthly and on-year terms. As in other economies, an extended and sustained decline in Canadian energy prices would go a long way toward containing inflation.
Tags: Canadian Dollar
ShareThis
