Statistics Canada reported that producer prices in Canada rose for the second straight month in March. The ongoing pressure in producer prices is keeping costs relatively high for businesses, which ultimately weighs on prices at the consumer level. Prices for oil and other commodities have risen in 2024 in response to geopolitical tensions, production cuts and relatively resilient global economic growth.
- Producer prices in Canada rose by 0.8% in March over the previous month. This marked the second consecutive increase after rising by 1.1% in February, which was the largest increase since August 2023.
- Rising costs for energy products was a key contributor to March’s increase. Oil prices have risen in 2024 in response to supply concerns amid geopolitical tensions, along with production cuts from the Organization of the Petroleum Exporting Countries and allies. Prices for metals, wood and meat also edged higher in March.
- March’s increase helped to keep consumer prices elevated. Canada’s inflation rate ticked higher in March. Importantly, however, core inflation, which excludes volatile items such as energy and food, came down in March. This raised expectations that the Bank of Canada (BoC) might begin lowering interest rates this summer.
- Higher prices have weighed on Canadian households in recent months, dragging down sentiment. The Bloomberg Nanos Canadian Confidence Index fell over the week ended April 19 with Canadians concerned about the strength of Canada’s economy and their employment security.
While consumer and producer price growth both remain on an overall downward trend, they still remain elevated. This has weighed on Canadian economic activity over the past few quarters. Market participants are hopeful that the interest-rate hikes from the BoC since 2022 will help to keep pushing inflation down, which might allow Canada’s central bank to start lowering interest rates, and could help stimulate economic activity.
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