The effects of a stronger dollar are already appearing in Canadian industrial product prices, which plunged in April, dropping by a larger-than-expected 1.4%.

On an annual basis, the Industrial Product Price Index declined 0.1%, after eight months of increases according to Statistics Canada.

Excluding energy, prices dipped 0.8%, largely due to the stronger dollar, says BMO Nesbitt Burns. It points out that price declines were noted in 14 out of 21 categories. On top of the sharp decline in energy, manufacturers also received less for motor vehicles, lumber, and primary metal products.

“April revealed significant disinflation for industrial products,” says CIBC World Markets. “A giveback in energy and a stronger dollar played starring roles in the April results, with the latter accounting for close to half of the monthly price decline.”

Nesbitt notes that raw materials prices also came in below consensus, having fallen 6.5%, as all categories of raw goods were either lower or unchanged. The main reason was crude oil, which dropped 15.8%. “However, excluding the impact of energy, raw materials prices were still down 1.1%.”

“Industrial product and raw materials prices are driving home the point that Canadian inflation pressures are unwinding rapidly. This report reinforces the more benign inflation outlook and suggests that the Bank of Canada will need a comfy seat for their stay on the sidelines,” Nesbitt concludes.