Canada producer prices drop 1.5 percent, biggest fall in 2-1/2 years

The city's industrial zone looms over residential neighborhoods in Hamilton, Ontario, Canada May 14, 2017. Picture taken May 14, 2017. REUTERS/Chris Helgren

OTTAWA (Reuters) - Canadian producer prices fell 1.5 percent in July from June, the biggest decline in 2-1/2 years, as a stronger Canadian dollar cut the cost of motorized and recreational vehicles, Statistics Canada said on Tuesday.

The drop was the largest month-on-month slump since the 1.5 percent retreat seen in December 2014. Of the 21 major commodity groups, 18 fell, one increased and two were unchanged.

Prices for motorized and recreational vehicles plunged by 3.3 percent, the largest fall in more than eight years, thanks largely to a 4.6 percent gain in the value of the Canadian dollar against the greenback in July.

Many vehicles are priced in U.S. dollars and become less expensive when the Canadian currency strengthens.

The producer price index would have decreased by just 0.4 percent in July had the exchange rate stayed constant.

Raw material prices slipped by 0.6 percent from June on lower prices for metal ores, concentrate and scrap.

Reporting by David Ljunggren; Editing by W Simon