-Doug Porter, chief economist at BMO Capital Markets
Canada's producer prices rose in May, led by increasing costs of energy and petroleum products, Statistics Canada said. Canada's industrial product price index climbed 0.5% in the reported month, following a 0.9% decrease in April. This indicator measures the price manufacturers receive once their goods leave the plant, and does not reflect the final prices consumers pay for goods. Of the 21 commodity groups, three increased, 15 declined and three stayed the same. Prices for energy and petroleum products jumped by 5.0%, mainly thanks to a 7.1% advance in motor gasoline prices. Meanwhile, the Raw Materials Price Index surged 4.4% following the upwardly revised increase of 4% in April. One of the biggest upward drivers supporting the figure was more expensive crude energy products, which advanced 8.8%. Oil has been rebounding since the second half of 2014, with the help of a recovery in conventional crude oil, which surged 37.2% since January 2015. Excluding energy, RMPI rose 1.1%.
In May, Canadian inflation surprised on the upside, with the pace accelerating to 0.9% over the year, led by rising food prices, after falling to 0.8% in April, the slowest pace since October 2013. The Bank of Canada's annualized core CPI, which excludes eight volatile components, dropped to 2.2% from 2.3%, remaining above the 2% target rate set by the BoC.
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