Statistics Canada reported today that producer prices increased in July, reversing June’s decline. Prices at the producer and consumer levels increased in July as US-Iran tensions reemerged, closing the Strait of Hormuz and putting upward pressure on oil prices. Besides producer prices, investors were focused on trade talks between Canada and the US, where new details emerged as the two sides worked toward finalizing a trade deal.

• Producer prices in Canada rose by 0.6% in July over the previous month. Prices rebounded from the 1.4% decline in June. On a year-over-year basis, producer prices rose by 12.4% in July.
• Energy prices were the main contributor to July’s increase. Prices for energy and petroleum products jumped by 6.4% in July as the resumed US-Iran conflict tightened fuel markets.
• It lines up with this month’s consumer price data. Canada’s annual inflation rate rose to 3.0% in July from 2.8% in the previous month.
• On the trade front, the clock is still ticking to finalize a trade deal. Ottawa and Washington say they have reached an agreement in principle to avert the 50% tariffs US President Donald Trump had threatened on Canadian goods.
• The pause gave Canadian and US negotiators until today to finalize the paperwork. Details have emerged, including lower tariffs on Canadian steel, aluminum and automotive. Canada is preparing to allow US alcohol back onto store shelves.

Today’s data is a reminder that energy remains the key factor behind Canada’s producer prices, something the Bank of Canada will keep watching to see how much passes through to consumers. On trade, all eyes are on Ottawa and Washington through the end of the week. Officials on both sides sound confident a deal will be signed, but some uncertainty remains for exporters until it is.

If you would like to discuss this economic and market update or have questions about your finances and investments, please feel free to contact me anytime.