The falling Industrial Product and Raw Material Price Indexes show that inflation is hardly a worry as the economic slowdown bites harder.

The slide in Canadian industrial product and raw material prices were in line with expectations in July, falling thanks to weaker energy prices.

Excluding energy, industrial prices were flat in July, while underlying raw material prices fell 0.3%. “The main message is that the deepening slowdown in global industrial activity is crushing inflation pressures at the early stages,” says BMO Nesbitt Burns.

The firm’s economists say that the flat core industrial prices are particularly impressive since the dollar was down further in the month. It says, Statistics Canada estimates that a weaker dollar added 0.3% to costs in the month, and over the past year, the sagging loonie has pushed up overall prices by more than a 1%. “In other words, had the dollar simply held steady over the past year, instead of dropping nearly 5%, industrial prices would have slipped 0.2% in July.”

“Energy prices are leading overall producer prices lower after last year’s spike, but underlying costs are also moderating amid the global slowdown,” concludes BMO Nesbitt Burns “This supports the Bank of Canada’s view that core consumer inflation may soon begin to also fade.”