Canadian producer prices rose more last month than economists expected, suggesting that inflation pressure may be building.

Canadian industrial product prices jumped 0.6% in August after a 0.2% gain in July. The result was a bit higher than expected, led by stronger energy prices. Excluding energy, prices were up 0.5%. There was also strength in pulp and paper products and motor vehicles. Primary metal prices slipped.

The raw materials price index increased at a lower-than-expected rate of 1.1% in August, led by mineral fuels and vegetable products.

RBC Financial Group economists conclude, “Markets will take little cue from these price indices, given that there is generally little relation to these two indictors and consumer prices. What is generally clear, however, is that pricing pressure – as measured by demand related indices such as the CPI – is already building in Canada. Supply-side indicators, such as the IPPI and RMPI, are now starting to reflect increasing prices as well.”

However, BMO Nesbitt Burns says, “Canadian industrial prices remain virtually flat on a year-over-year basis, which suggests corporate pricing power continues to be weak.”