Manufacturers’ prices were up 0.3% in December following two months of decrease, Statistics Canada reported this morning

Compared with December 2002, prices fell 3.4%, largely as a result of the continuing effect of a strong Canadian dollar against the US dollar, StatsCan said.

Without the dollar’s influence, the Industrial Product Price Index (IPPI) would have risen 1.0% rather than falling 3.4% from a year ago.

On a monthly basis, prices for primary metal products were up 2.3%, the result of higher prices for nickel, silver and gold. Motor vehicles and other transport equipment increased 0.5%, mainly the result of the effect of the exchange rate.

Higher prices were also observed for petroleum and coal products (+1.6%), electrical and communication products (+0.3%) as well as meat, fish and dairy products (+0.2%).

Lumber and other wood products were down 3.6% from November. Decreasing prices for particleboard and softwood plywood were responsible for this drop, as demand declined for these products.

The rise in industrial product prices was in line with economists’ consensus expectations. Raw materials prices were also up 2.4% in the month. “Today’s monthly increase was likely due to the backing up of the Canadian dollar over December, from rapid gains earlier in the year. Because the industrial product index measures the prices received by producers in Canada, and prices for Canadian goods are often quoted in US dollars, December’s decline in the dollar means that more Canadian dollars were received, pushing prices upward,” explains RBC Financial.

“Soaring commodity prices and a modest pullback in the Canadian dollar last month finally produced a small positive reading on producer prices,” says BMO Nesbitt Burns. “Even with this modest advance, prices are still down a hefty 3.4% from year-ago levels, following the post-war-low reading of down 4.1% in November. Suffice it to say that even with last month’s rise, producer prices represent absolutely no threat to inflation.”

In a separate release, StatsCan said payroll employment for November dropped by 2,200, largely due to declines in manufacturing and wholesale trade.

“This payroll number is in stark contrast to the Labour Force Survey results for the same month, which reported a gain of 54,000 jobs. Wages also came in on the weak side, with weekly earnings rising only 0.9% on a year-over-year basis, considerably lower than the 2.1% pace set one year ago. Finally, average weekly hours dipped to 31.9 from 32.1 in October,” says RBC.