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Producer Inflation is edging off

Not entirely surprising, since oil has been in the $90/100 range for a few months, producer price indices have gone negative for a bit. Industrial producer prices are off by 0.2% and raw material prices are down 5.2% (over one month) again the volatility of oil prices is largely to blame here.  A week ago, the WTI traded as low as 89.95, while this morning it "opened" near 95.50 a 6% increase in 7 days.

However, StatsCan had more information on raw materials, not only are prices falling but inventories are rising  (especially aluminum), this could be temporary or an indication of something more permanent.  Car sales stats that came out Friday last week (U.S.) were disappointing.  Although the recent Japanese discovery of rare metals in the sea off the coast of Hawaii  in quantities (and concentration 1,000x larger than what is available on land) could be interesting 

The not so good news is that the IPPI (Industrial Producer Price Index) for the past 12  months is up 5.2% -- it goes to show how serious things are getting on the Canadian inflation front.  Futures for rising interest rates are back up to the 52 range (which implies a 50 bps increase in the short term interest rates within the next 12 months), which is just a market sentiment index (its not an indication of anything but what the market "believes" today).  Two weeks ago it was around 20 (which implied to increase in rates for the next 12 months).

Combating inflation is the sudden strengthening of the CAD, which last week moved from the 1.01/99 range to the 1.04/96 range on Friday.  Amazing week in the markets last week, based on virtually no good news on the economy and very limited corporate earnings the market rose by 5%, still below the May high, but generally disappointing economic news (especially light vehicle sales) did not stop the market rise (on very thin volume).  It would seem that the fabled  "plunge protection team" was in full swing last week!

GDP growth was flat in April -- which was better than expected (0.1%), it would seem that GDP growth is "decelerating" in Canada following the blistering Q1 performance of +3.9%.  It would seem that Q2/11 will be a 1.7% GDP growth -- that remains in line for full year GDP growth of 2.5%.

Aside from that a quiet week -- little serious data out of Canada.

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