FINWIRES · TerminalLIVE
FINWIRES

Canada's Product Prices in May Rise for The Fifth Month in A Row as Middle East Conflict Impacts Commodity Markets

By

Prices of products manufactured in Canada, as measured by the Industrial Product Price Index (IPPI), were up 1.2% month over month in May and increased 13.6% year over year, said the country's statistical agency on Thursday.

The IPPI's May rise marked the fifth consecutive monthly increase. Disruptions to shipping through the Strait of Hormuz continued to affect global commodity markets in May, reflecting impacts on crude oil costs and supply chains since March, noted Statistics Canada in a statement.

This situation contributed to price increases across various commodity groups, including chemical and chemical products, energy and oil products and primary non-ferrous metal products, StatsCan added.

Excluding energy and oil products, the IPPI increased 0.9% month over month.

May's 1.2% month-over-month climb was less than the 2.5% month-over-month increase expected by Bank of Montreal.

Prices of raw materials purchased by manufacturers operating in Canada, as measured by the Raw Materials Price Index (RMPI), increased 0.7% month over month and rose 33.4% year over year, said the Ottawa-based agency.

Data collected from this survey are used to produce two key measures of price change for the Canadian economy: the IPPI and the RMPI. The IPPI measures price movements for products sold by manufacturers in Canada, and the RMPI measures price movements for raw materials purchased by manufacturers in Canada. Data for about 6,000 products are used to produce the IPPI and RMPI.

The IPPI and RMPI are used extensively by businesses for contract escalation and industry analysis. StatsCan uses these indexes to deflate current dollar values and derive estimates of real growth and productivity for the manufacturing sector.

Related Articles

Treasury

US Treasury Closing Levels

3:00 Wednesday vs 3:00 Tuesday2yr 99-22 vs 99-29; 4.163% vs 4.045%5yr 99-17 vs 99-28; 4.229% vs 4.149%10yr 99-09 vs 99-18+; 4.461% vs 4.426%30yr 101-04+ vs 101-03+; 4.923% vs 4.927%2/10 29.580 bps vs 37.825 bps5/30 69.293 bps vs 77.641 bps

Treasury

Berenberg Assesses the Economic Impact of The U.S.-Iran Deal

In their framework agreement to be signed on Friday, Iran and the United States have apparently left some key issues unresolved, said Berenberg.Examples seem to include the dilution or disposal of Iran's highly enriched uranium, the Israel/Lebanon issue, some details of long-term sanctions relief for Tehran and, possibly, the precise arrangements for managing the Strait of Hormuz in the future.However, chances are that both sides will want to avoid the pain of a new prolonged closure of the Strait of Hormuz, U.S. President Donald Trump probably even more so than Iran, noted the bank. A collapse of the deal, followed by a renewed surge in oil prices, could hurt Trump's Republicans badly at the midterm elections to Congress on Nov. 3.The structure of the deal, with a 60-day period for further negotiations, should make it easy to simply extend the deadline further and further if the two sides cannot settle their differences in time.Since late April, Berenberg has based its economic and financial forecasts on the assumption that the worst would be over by June. More precisely, the bank suggested that the price for dated Brent crude would fall from an average of US$120 per barrel in April to around US$90 in June and further to US$75 in January 2027.Berenberg now seems to be on track for that. Futures prices have receded to be roughly in line with the bank's oil price assumption. As a consequence, it sees no need to revise its economic or financial forecasts.For the last three months, Berenberg has argued that bond markets have overreacted to the surge in energy prices. Central banks won't tighten policy as aggressively as markets are pricing in.Unlike in 2021 and 2022, when the combination of an ultra-loose monetary policy and a V-reshaped economic rebound from the pandemic had paved the way for a major surge in inflation even before Russian President Vladimir Putin had launched his full-scale invasion of Ukraine, the potential for major second-round effects from the spike in energy prices and transport costs is low, added the bank.

$CXY
Treasury

The Canadian Dollar May Swing on USMCA Trade Review News, Says Rosenberg Research

U.S. President Trump's announcement last week that the United States will not renew the USMCA trade deal wasn't especially surprising, said Rosenberg Research.The agreement would remain in force until 2036, but the decision would trigger annual review periods, and it fits neatly within the U.S. administration's broader strategy of maximizing negotiating leverage, noted Rosenberg Research.USMCA is proceeding with a mandatory joint review, starting this July. The USMCA talks so far are showing minimal progress, with U.S. officials framing Canada as non-responsive. Changes to rules of origin, and specifically questions about the Chinese content of goods, have been a major theme of the negotiations.With their USMCA-compliance exemptions shielding them to some extent from the Section 301 tariffs, Canada and Mexico continue to have a competitive advantage relative to most other exporters in the U.S., providing some insulation from U.S. trade policy volatility.However, there are still vulnerabilities, stated Rosenberg. A U.S. refusal to renew the deal would leave the USMCA in force, but the reversion to an annual, rather than six-year, review process, and the exposure to mercurial swings in U.S. trade policy, would also present a sustained overhang that would weigh on international direct investment and domestic investment trends in Canada, with potential spillover effects on trade and employment.Canada's economy remains cyclically battered by the events of the last year and a half, along with poor structural growth to begin with. Jobs data has been volatile, with the May numbers showing a drop in unemployment from 6.9% to 6.6%, but the employment growth trendlines have been very poor over the last year, pointed out Rosenberg.For Canadian assets, the new reality is clear. Rosenberg expects some heightened market sensitivity for the Canadian dollar, and in particular, there is a "skew" to the potential market moves.Sudden setbacks in the negotiations will cause downside jumps in the loonie, while any gains will be incremental, according to Rosenberg.

$CAD$CXY