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IPPI 12 months up 5%

Title is a little cryptic, but bottom line Industrial Produce Price Index for the month of March 2011, shows a 12 month increase of 5%, over March 2010.  It would have been 6% had the CAD not strengthen by 4.8% during the same period.

The biggest contributors were the energy complex, with oil up 13% YoY and coal up 24% YoY.  On the positive side metals and raw material prices were down, but as everyone knows precious metals were up.  There is no doubt that there is continued pressure on producers’ prices will eventually impact the bottom line of Canadian producers, and already the diffusion index (on prices) shows that an increasing number of producers are looking at price rises.


None of this will be a surprise to Mark Carney (BoC Governor) in his ultimate decision to increase (or to stay) on interest rates.  It is evident that the Federal Reserve takes the view that raw material prices (energy, Metal and non-metal materials) are showing transitory increases that will stabilize.  It is unclear at this stage with the BoC’s actions (or views for that matter) will be.  However, many signals are emerging from the Canadian economy that all segments are firing on all cylinders, and that there may be some scope for some monetary (and maybe even after today’s elections) fiscal tightening.

On the bright side (and maybe tempering Carney’s ardors) excluding mineral fuels, IPPI for March would have been down 1.9% -- of course eliminating factors that show increase will always result in better numbers.  Still, fuel prices are externalities to Canada’s economy, and impose a “tax” on Canadians.  Finally, the strength of the CAD also acts as a cooling mechanism.

Interesting times.  

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