Canadian producer prices were unexpectedly stronger in July, but raw materials prices fell.

Statistics Canada reported Wednesday that manufacturers’ prices were up 1.3% in July, ending a string of four monthly declines.

BMO Nesbitt Burns says that the surprising rise came as the Canadian dollar weakened against the U.S. dollar in July, pushing up prices of commodities that are quoted in the U.S. currency, such as motor vehicles and lumber products. Excluding the effect of the stronger greenback, industrial prices would have edged up only 0.1%, Nesbitt notes.

From a monthly perspective, higher prices for motor vehicles and other transport equipment (+2.9%), lumber and other wood products (+3.6%) and primary metal products (+2.3%) were the major contributors to the increase in the IPPI. Prices for petroleum products also rose (+1.6%), as well as those for electrical and communication products (+1.7%). However, prices for meat, fish and dairy products were down 2.4% from June.

Nesbitt says that the rise in industrial prices was driven by transport equipment, lumber and other wood products and primary metal products. In contrast, the effect of mad cow disease dragged down prices for meat, fish and dairy products.

At the same time, raw materials prices fell 1.5% in July. RBC Financial says that animal products led the decline with prices for cattle and calves for slaughter plunging by 43.8% from the previous month due to the impact of a single case of BSE found in Alberta. “Overall, today¹s price reports reinforce the view that inflationary pressures are virtually non-existent in the Canadian economy and this provides further support to the Bank of Canada¹s decision to have cut rates by a quarter point,” RBC says.

“The weaker loonie in July alleviated some of the downward pipeline price pressures and is putting some pricing power back in the hands of Canadian companies,” Nesbitt concludes. “While industrial product prices may experience the weak loonie effect again in August, we expect to see the Canadian dollar strengthen further in the medium-term, putting further strain on Canadian companies.”