A report on Canadian industrial product prices provided more evidence that inflationary pressures are building inside Canada’s economy. Producer prices surged higher in March, mainly due to rising energy costs. This has been a common theme in consumer and industrial prices reports here in Canada and abroad. The conflict in the Middle East has pushed up oil prices and the prices of several other key commodities.

• Producer prices in Canada rose by 2.4% in March over the previous month. This came in above the 1.9% increase economists had expected, based on a Bloomberg survey. Producer prices rose by 0.6% in February after rising by 2.7% in January, which was brought on by higher costs for metal products. Gold, copper and silver all reached record-high prices that month.
• The prices for energy and petroleum products increased at a record pace, rising by 27.4%. Prices for chemicals and chemical products also increased sharply over the month.
• Producer prices rose by 7.8% year over year in March, which was the largest annual jump since November 2022.
• In a separate report, Statistics Canada estimated that Canadian manufacturing sales rose by 3.5% in March, adding to the 3.6% gain in February. February’s strong increase was driven by a rise in sales of petroleum products and transportation equipment.
• South of the border, a preliminary reading from S&P Global showed that US manufacturing sector activity picked up in April, expanding at its fastest pace since May 2022.

Prices at the producer level are climbing. Data earlier this week showed consumer prices are moving higher. This could eventually weigh on consumer and business spending, which could hinder overall economic activity. Reports yesterday showed the US and Iran are playing hardball with each other, heightening uncertainty about when the two sides will get back to negotiating a peace agreement.

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