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Canadian Producer Prices Index:


Forgetting the monthly data (it’s still accelerating!) the more interesting analysis is the 12 month picture.  Don’t forget that both the Canadian CPI and Core CPI are low, around 1.9% and 0.9%, and trending down.  Looking other side of the transaction we are seeing fast rising producer input prices (creating a profit squeeze for manufacturing and other industries).

The annual IPPI rose 3.4% in February after advancing 3.0% in December and 2.9% in January (in a nutshell its accelerating). The IPPI rise was driven by higher fuel costs (+16.0%), and metals (+15.6%).  Even fruits, vegetables, feeds and other food products all saw rises that substantially outstrip CPI and Core CPI (+5.0%).

Unlike the U.S. which saw a 12% increase in food price over the past 12 months, Canada’s food prices were tempered by the 7.0% YoY appreciation of the CAD against the USD. Currency appreciation reduces IPPI increase by more than 0.5%.  Finally, the Raw Material Producer Index rose by 19.2% YoY, the highest growth since April 2007, when it rose 21.8%.

These statistics may partly explain why Canadian manufacturers are investing so heavily in plant and equipment, we are talking massive double digit growth (a trend that continues from 2010), the implication for productivity are important, we should see Canada’s productivity position Vs. the U.S. improve, as American plant and equipment investments has been in the basement for several years (excess capacity) and the slow “re-hiring” will reduce productivity (initially).

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