By Robb M. Stewart
Producer prices in Canada increased slightly last month, marking the first rise since October of last year. The rise can be attributed to a significant jump in refined petroleum products. Additionally, Canadian companies saw an increase in the prices of raw materials.
Industrial Product Price Index
According to Statistics Canada, the industrial product price index rose by 1.3% in August compared to the previous month. However, on a year-on-year basis, the index fell by 0.5%.
The increase in prices for refined petroleum energy products was the primary driver of the monthly rise. Diesel and gasoline prices both saw an increase during a month when the average price for crude oil also rose.
Excluding energy products, producer prices only edged up by 0.2% on a monthly basis, as reported by the data agency on Monday.
Chemical and Chemical Products
Prices for chemical and chemical products also saw an increase after experiencing seven consecutive months of decline. Notably, prices for petrochemicals and fertilizers advanced during this period, according to Statistics Canada.
It’s important to note that the industrial product price index measures the prices received by Canadian manufacturers once their goods leave the plant. It does not reflect the final prices consumers pay for goods on store shelves.
Raw Materials Prices
In terms of raw materials prices, there was a 3% increase from July. However, compared to the same period last year, raw material prices declined by 4.3% in August.
Prices paid for crude energy experienced a strong increase for the second consecutive month, primarily due to higher prices for conventional and synthetic crude oil. Excluding crude energy prices, the raw materials price index saw a 0.2% increase compared to the previous month.
Bank of Canada’s Interest Rate
Earlier this month, the Bank of Canada decided to maintain its policy interest rate at a 22-year high of 5%. This decision came after a significant slowdown in the country’s economy during the second quarter, with output shrinking on an annualized basis. The slowdown was driven by weakening consumption growth and a decline in housing activity.
The central bank has forecasted that annual consumer price index inflation, which reached 3.3% in July, will remain around 3% for the next year as economic growth becomes more subdued.
