Analysis:Stronger CAD Further Weighs On Cdn Industrial Prices>

By Yali N'Diaye

     OTTAWA (MNI) - The ongoing appreciation of the Canadian dollar in 

July further weighed on industrial prices, which were down 1.5% on the 

month, recording their largest decline since December 2014, data from 

Statistics Canada showed Tuesday. 

     Lower prices were recorded across 18 of 21 major commodity groups, 

led by motorized and recreational vehicles, which are particularly 

sensitive to exchange rate fluctuations, as their prices are reported in 

U.S. dollars and then converted into Canadian dollars based on the 

monthly average exchange rate. 

     Over the month, the Canadian dollar appreciated 4.6% against the 

U.S. dollar. Had the exchange rate remained constant, the industrial 

product price index would have decreased 0.4% instead of 1.5%. In June, 

the preliminary IPPI had been reported down 1.0%, with the loonie's 

appreciation explaining half of the decrease. The revised IPPI was down 

1.1% in June. 

     Prices for motorized and recreational vehicles - representing the 

largest weight in the index at 17.2% - fell 3.3% on the month, recording 

their largest drop since May 2009, with passenger cars and light trucks 

down 3.5%, engines and parts down 2.7%, and aircraft down 4.4%. 

     Energy and petroleum prices, the second largest weight in the 

index, were down 0.3% on the month, which will likely weigh on nominal 

manufacturing sales in July. 

     Excluding energy and petroleum, the IPPI was down 1.7%, reflecting 

the widespread nature of price declines, with lumber and other wood 

products being the only category to record higher prices (+0.5%) in 

July. 

     The IPPI was up 1.3% on a 12-month basis, its smallest gain since 

October 2016, following a 3.1% increase in June. 

     It remains to be seen if and to which extent the Canadian dollar 

appreciation impacts prices at the retail level down the road. In July, 

the consumer price index was up 1.2% year-over-year, rising for the 

first time in five months. 

     Two of the three Bank of Canada's preferred measures of core 

inflation also picked up in July, bringing the range to 1.3%-1.7% from 

1.2%-1.6% in June. 

     Statistics Canada also reported Tuesday that raw materials prices 

were down 0.6% in July after a 3.6% drop in June, with the 12-month rate 

picking up to 4.5% from 2.3%. 

     Excluding a 0.6% decrease in crude energy, prices were also down 

0.6% on the month, led by a 2.4% decrease in metal ores, concentrates 

and scrap. 

-- MNI Ottawa Bureau; email: yali.ndiaye@marketnews.com -- 

[TOPICS: M$C$$$,MACDS$]