MNI Analysis: Weaker CAD Boosts Canadian Industrial Prices>

--IPPI +1.0% M/M, +1.8% Y/Y; RMPI +3.8% M/M, +6.6% Y/Y

--IPPI Excluding CAD Depreciation Impact +0.4%

By Yali N'Diaye 

     OTTAWA (MNI) - Canadian industrial product prices rebounded 1.0% in 

October, following a 0.3% decrease in September, lifting the 12-month 

growth rate to 1.8% from 1.5%, Statistics Canada reported Tuesday. 

     The Industrial Product Price Index (IPPI) was boosted by the 

depreciation of the Canadian against the greenback by an average 2.6% 

over the month, after appreciating 2.6% in September and 0.7% in August. 

     Had the exchange rate remained constant, the IPPI would have been 

up just 0.4%, meaning the weaker currency explained 0.6 points of the 

1.0% monthly increase in October. 

     The data suggest a positive contribution from prices to nominal 

manufacturing sales over the month. 

     While the loonie depreciated over the month, it had been 

appreciating previously, owing to a stronger-than-expected economic 

growth performance that culminated with two interest rate hikes by the 

Bank of Canada in July and September. Since then, expectations of 

further tightening have moderated. 

     Still, in its October economic update, the BOC said "the recent 

appreciation of the Canadian dollar is estimated to reduce projected 

inflation." 

     While gains were widespread, with 18 of 21 commodity groups posting 

higher prices on the month, they were led by a 1.5% increase in motor 

and recreational vehicles, following a 1.7% drop the previous month. The 

October price increase was the largest since January 2016 for the sector 

whose prices are particularly sensitive to exchange rate movements. 

     Energy and petroleum prices were another important positive 

contributor on the month, with prices up 1.5% as well. Excluding this 

category, the IPPI was up 0.9% in October, the largest gain since 

January 2016, lifting the 12-month growth rate to 0.7% from 0.1%. 

     Looking at prices paid for key raw materials, they rose 3.8% on the 

month (+6.6% year-over-year), recording their largest increase since 

December 2016. All categories were up except forestry products. 

     Excluding a 1.7% gain in crude energy prices, the RMPI was up 1.7% 

on the month and 7.5% year-over-year.

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

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