The Industrial Product Price Index held up better than economists were expecting in November, but not enough to spark inflation worries.

“Contrary to expectations, Canadian industrial product prices did not decline in November, even as consumer prices recorded their largest decline in 40 years,” says BMO Nesbitt Burns.

“However, the flat performance of industrial prices in the month followed a downwardly revised 1.3% plunge in October. As well, prices dropped 1.9% from year-ago levels in November, the steepest year-over-year fall since 1992.” Energy prices have been the biggest source of weakness, but prices are also down in pulp & paper, primary metals, and communications equipment.

The sickly Canadian dollar is a big reason that industrial prices are not dropping even more quickly, notes BMO. “The currency hit an all-time low in the month, putting some upward pressure on domestic prices. Excluding the impact of the sliding dollar, StatsCan estimates that prices would have declined 0.5% in November.”

Raw material prices were roughly in line with expectations, dropping 2.9% in November.

“The slide in energy costs is still dominating trends in industrial prices, but the underlying picture is also quite restrained. In fact, the weak Canadian dollar is partially masking deflationary trends at the producer level. Even with a pick-up in growth this year, producer price pressures will remain very weak,” says BMO.