The Industrial Product Price Index rose 0.5% in the month. Economists were calling for a small drop in prices. BMO Nesbitt Burns says that the run-up is due to two factors, energy and the weak dollar. “Energy prices are reported to have charged up 3.5% in the month, although oil prices were falling fast by the second half of the month. A weak Canadian dollar also put upward pressure on prices. Statscan estimates that prices would have declined 0.1% outside of exchange rate effects”.

Apart from energy, there were also large increases in auto prices, electrical and communications equipment, and machinery & equipment. “All of these gains likely reflect pressure from a weaker dollar, as none of these industries have much pricing power in the current environment. On the other side, food, forest products, and primary metals prices all fell last month.”

“While a weak Canadian dollar will continue to put upward pressure on industrial prices in the months ahead, this factor will soon be swamped by deteriorating global growth,” says BMO.