Lower Canadian dollar helps lift Canada August producer prices

Thu Sep 29, 2011 10:32am EDT
 
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OTTAWA (Reuters) - A weakening of the Canadian dollar helped pushed up the Canadian producer price index in August by 0.5 percent, Statistics Canada said on Thursday.

Prices for motor vehicles and other transportation equipment jumped 1.7 percent in the month as the currency fell from the 3-1/2 year highs recorded in July.

Many Canadian producers who export their goods are paid in U.S. dollars, and a decline in the Canadian dollar relative to the greenback has the effect of increasing prices in Canadian dollars.

Stripping out the impact of the currency movements, producer prices would have fallen 0.2 percent, closer to the 0.3 percent decline forecast by analysts in a Reuters poll.

The increase in industrial product prices followed three months of declines. Statscan revised the July drop to 0.4 percent from 0.3 percent previously.

The unexpectedly sharp jump in prices producers receive for goods as they leave the factory follows data earlier this month showing Canada's annual inflation rate climbed to a higher-than-expected 3.1 percent in August.

Analysts say producer prices do not necessarily trickle down into the consumer price index. In any case, the Bank of Canada has signaled that it is not overly concerned about inflation that is above its 2 percent target because of the considerable constraints on economic growth caused by a weak U.S. export market and the blow to confidence from the European debt crisis.

Raw materials prices fell 3.2 percent in August, largely because of a drop in crude oil prices.

Compared with August of last year, producer prices rose 5.2 percent and raw materials prices jumped 13.3 percent.   Continued...